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American Petroleum Institute v. Bullseye Automotive Product Inc.

United States District Court, S.D. Indiana, Indianapolis Division

December 5, 2016

AMERICAN PETROLEUM INSTITUTE, Plaintiffs,
v.
BULLSEYE AUTOMOTIVE PRODUCT INC., et al., Defendants.

          REPORT AND RECOMMENDATION REGARDING MOTION TO RECONSIDER DENIAL OF PLAINTIFF'S MOTION TO HOLD DEFENDANTS IN CONTEMPT [DOC. 120]

          Denise K. LaRue United States Magistrate Judge.

         Plaintiff's Motion to Reconsider Order Denying Plaintiff's Motion to Hold Defendants in Contempt is before the Court, having been referred by the Honorable Tanya Walton Pratt, District Judge. The Magistrate Judge's contempt authority is set forth in 28 U.S.C. § 636(e). Since the parties have not consented to the Magistrate Judge's jurisdiction, the undersigned makes a report and recommendation certifying the following facts to the District Judge who has the authority to punish contempt. See Id. § 636(e)(6)(B)(iii).

         Findings of Fact

         1. On October 31, 2014, this Court entered its Default Judgment for Permanent Injunction Against Bullseye Automotive Products Inc. and Bullseye Lubricants Inc. [doc. 99] (the “Injunction”).

         2. Pursuant to the Injunction, Defendants (“Bullseye”) were permanently enjoined from using in any form or manner the APO Starburst, the name and mark American Petroleum Institute, the name and mark API, and any confusingly similar marks or names, including the Counterfeit Starburst and the Second Counterfeit Starburst depicted in the Injunction, and also were ordered, inter alia, to:

(a) Issue, by no later than November 3, 2014, corrective advertising and publish in one major newspaper of general circulation in Chicago, Illinois, in one major newspaper of general circulation in Detroit, Michigan, and in one major newspaper of general circulation in Indianapolis, Indiana, as well as in the trade publications titled Lubes and Greases Magazine, NACS Magazine, and ILMA Compounding Magazine, the Notice set forth in the Injunction;
(b) Send the Notice directly to all distributors who have purchased Bullseye products bearing the complained-of labels and refund the distributors the full purchase price for all products bearing the complained-of labels that the distributors return to Bullseye; and
(c) File with the Court, no later than November 10, 2014, a verified certification of compliance with the Injunction.

[Default J. for Permanent Inj., doc. 99 at 2-4.]

         3. Also on October 31, 2014, the Court entered a Judgment for Damages Against Bullseye Automotive Products Inc. and Bullseye Lubricants Inc. [doc. 100], ordering Bullseye to pay damages to American Petroleum Institute (“API”) in the amount of $1, 827, 674 with post-judgment interest to accrue at the highest rate permitted by law until paid in full.

         4. On November 3, 2014, API's counsel sent a letter by FedEx to Bullseye's President, Carlos Silva, summarizing and enclosing a copy of the Injunction, which was delivered to Silva's residence on November 5, 2014; a copy of the letter and its attachments were emailed to Silva on November 11, 2014. [See B. Brett Heavner Declaration, doc. 104-1, ¶ 2.] The physical address and email address API's counsel used were the same addresses that Silva provided during his deposition on January 10, 2014. [Id., doc. 104-1, ¶ 4 & Ex. C.]

         5. Bullseye failed to comply with the Injunction by:

(a) Failing to publish the Notice in one major newspaper of general circulation in Chicago, Illinois, in one major newspaper of general circulation in Detroit, Michigan, and in one major newspaper of general circulation in Indianapolis, Indiana, as well as in the trade publications titled Lubes and Greases Magazine, NACS Magazine and ILMA Compounding Magazine [see Decl. of Emily Florio, doc. 104-2, ¶¶ 3-11]; and
(b) Failing to file with this Court a verified certification of their compliance with the Injunction, which was due by November 10, 2014.

         6. Bullseye also failed to comply with other provisions of the Injunction, as shown by the following:

(a) On November 17, 2014, a week after Bullseye was required to file the verified certification, Bullseye engine oil bearing a label with the complained-of infringing imitation of the API Starburst mark was being offered for sale on the Wholesale Motor Oil website, www.vkwholesale.com/motor-oil-12-pk.htm [Heavner Decl., doc. 104-1, ¶ 6 & Exs. D-E.]
(b) The image of the infringing Bullseye label remained on the website as of December 26, 2014. [Id.]
(c) And on January 28, 2015, an internet search located at least one distributor of automotive products, Premier International, Inc. of Eastlake, Ohio (www.dollarstoredist.com), whose website displayed a photograph of Bullseye's motor oil bearing the infringed trademark at the following URL: http://dollarstoredist.com/popupimage.php?pID=18319. [Id., ¶ 7 & Ex. F.]

         7. On April 21, 2015, API filed a Verified Motion for Proceedings Supplemental [doc. 103] and Plaintiff's Motion to Hold Defendants in Contempt [doc. 104], requesting that the Court hold Bullseye in civil contempt for violating the Injunction, and enter coercive sanctions to induce Bullseye's compliance with the Injunction in the future and remedial sanctions to compensate API for Bullseye's non-compliance, including an award to API of its reasonable attorney fees and costs.

         8. On May 26, 2015, the undersigned held an evidentiary hearing on both motions at which Silva presented sworn testimony that:

(a) Bullseye was officially dissolved in August 2014, before the Injunction was entered;
(b) Bullseye paid him less than $28, 000 in 2014;
(c) After its dissolution, Bullseye had no assets, inventory, or funds left to pay for publishing corrective advertising, sending notices to its distributors, making refunds for returned products, or otherwise doing the things that Bullseye was ordered to do pursuant to the Injunction; and
(d) Silva did receive a copy of the Injunction, but when he received it, Bullseye had no funds left to do the things the Injunction ordered Bullseye to do.

         9. In support of the testimony that Bullseye had no funds to pay for publishing corrective advertising, etc., defense counsel Peter Limperis gave API's counsel prior to the hearing copies of Bullseye's 2013 and 2014 corporate tax returns; counsel also argued that because Bullseye had been dissolved before the Injunction was entered and because Bullseye had no funds to pay for corrective advertising, etc., it should not be held in contempt of court for not complying with the Injunction.

         10. “In light of the testimony given, ” the Court denied the contempt motion. [Entry from Proceedings Supplemental Hrg., doc. 116 at 1.]

         11. API subsequently filed a Renewed Verified Motion for Proceedings Supplemental [doc. 118] and Motion to Reconsider Order Denying Plaintiff's Motion to Hold Defendants in Contempt [doc. 120].

         12. After several continuances, on February 22, 2016, the Court held a combined hearing on the motions. [See doc. 148.] Plaintiff advised the Court that it would not pursue proceedings supplemental at that time and presented testimony in support of its Motion to Reconsider. Silva presented sworn testimony.

         13. The Illinois Secretary of State's website shows that Bullseye was not dissolved until April 10, 2015. [See 2/22/16 Mot. Hrg., Ex. 1, Carlos Silva Dep. 1/18/16, Ex. 1; see also doc. 120-1.]

         14. Furthermore, API has presented evidence that Silva's testimony that Bullseye had no funds to pay for publishing ...


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