Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_03-cv-05566/USCOURTS-cand-3_03-cv-05566-14/pdf.json

Parties Involved:
CSL, L.L.C.
Counter-defendant
Imperial Brush Co., Ltd.
Counter-claimant
Imperial Building Products, Inc.
Counter-claimant

Document Text:

1 TOWNSEND AN TOWNSEND AN CREW LLP

MARC M. GORELNIK (State Bar No. 166833)

2 NANCY L. TOMPKIS (State Bar No. 183623)

MARY L. SHAPIRO (State Bar No. 201199)

3 Two Embarcadero Center, 8th Floor

San Francisco, CA 94111

4 Telephone: (415) 576-0200

Facsimile: (415) 576-0300

5

Attorneys for Plaintif

6 CSL, L.L.c.

7 SEYFARTH SHAW LLP

8 KENNTH L. WILTON (SBN: 126557)

2029 Centur Park East, Suite 3300

9 Los Angeles, CA 90067-3036

Telephone: (310) 177-7200

10 Facsimile: (310) 201-5219

11 Attorneys for Defendant

12 IMPERIL BUILDING PRODUCTS, INC. and

Defendant and Counterclaimant

13 IMERIL BRUSH CO., LTD.

14

15

16

17

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORN

CSL, L.L.C., a Florida limited liability

18 company,

Case No. C 03~05566 JCS

19

20

Plaintiff, STIPULATION RE: ORDER OF

NOVEMBER 21, 2006

v.

21 IMPERIL BUILDING PRODUCTS, INC., a

company organized under the laws of Canada,

22 and IMERIL BRUSH CO., LTD., a

company organized under the laws of Canada,

23

24

25

26

27

28

Defendants.

STIPULATION RE: ORDER OF NOVEMBER 2 I, 2006

CASE NO.. C 03-05566 JCS

Case 3:03-cv-05566-JCS Document 296 Filed 12/05/06 Page 1 of 25
1 The Court's Order of November 21,2006 is under seaL. PlaintiffCSL L.L.c. and Defendants

2 Imperial Building Products, Inc. and Imperial Brush Co., Ltd., by and through their attorneys, agree

3 that a public version ofthe Cour's Order of November 21,2006, may be placed on the public docket

4 provided it incorporates the redactions shown in Exhibit A hereto.

5 The parties would also like to note to the Court that CSL is errantly referred to as "CLS" on

6 page 9, line 15 of the Order.

7

8 DATED: December 1,2006

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15 DATED: December 1, 2006

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22 60929233 vI

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Respectfully submitted,

TOWNSEND AN TOWNSEND AN CREW LLP

MARC M. GORELNI

By: Isl Marc M. Gorelnik

Marc M. Gorelnik

Attorneys for Plaintiff CSL, L.L.c.

Respectfully submitted,

TOWNSEND AN TOWNSEND AN CREW LLP

MARC M. GORELNIK

By: Isl Kenneth L. Wilton

Kenneth L. Wilton

Attorneys for Defendant IMERI BUILDING

PRODUCTS, INC. and Defendant and Counterc1aimant

IMPERIL BRUSH CO., LTD.

STIPULA nON RE: ORDER OF NOVEMBER 2 I, 2006

CASE NO. C 03-05566 JCS

Dated: December 4, 2006

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORN

I

A

IT IS SO ORDERED

Judge Joseph C. Spero

Case 3:03-cv-05566-JCS Document 296 Filed 12/05/06 Page 2 of 25
EXHIBIT A

Case 3:03-cv-05566-JCS Document 296 Filed 12/05/06 Page 3 of 25
1 TOWNSEND AN TOWNSEND AN CREW LLP

MARC M. GORELNIK (State Bar No. 166833)

2 NANCY L. TOMPKIS (State Bar No. 183623)

MARY L. SHAPIRO (State Bar No. 201199)

3 Two Embarcadero Center, 8th Floor

San Francisco, CA 94111

4 Telephone: (415) 576-0200

Facsimile: (415) 576-0300

5

Attorneys for Plaintif

6 CSL, L.L.C.

7 SEYFARTH SHAW LLP

8 KENNTH L. WILTON (SBN: 126557)

2029 Centu Park East, Suite 3300

9 Los Angeles, CA 90067-3036

Telephone: (310) 177-7200

10 Facsimile: (310) 201-5219

11 Attorneys for Defendant

12 IMERIL BUILDING PRODUCTS, INC. and

Defendant and Counterclaimant

13 IMERIL BRUSH CO., LTD.

14

15

16

17

UNTED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORN

CSL, L.L.c., a Florida limited liability

18 company,

Case No. C 03-05566 JCS

19

20

Plaintiff, (PROPOSED) REDACTED ORDER

v.

21 IMPERIL BUILDING PRODUCTS, INC., a

company organized under the laws of Canada,

22 and IMPERI BRUSH CO., LTD., a

company organized under the laws of Canada,

23

24

Defendants.

25

26

27

28

(PROPOSED) REDACTED ORDER

CASE NO.. C 03-05566 JCS

Case 3:03-cv-05566-JCS Document 296 Filed 12/05/06 Page 4 of 25
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r'~'iJ. L" '.:' ~ UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

. .

No. C-03-5566 JCS

ORDER GRANTING IN PART AN

DENYG IN PART PLAINTIFF'S

MOTION FOR CONTEMPT

SANCTIONS (Docket No. 181),

STRING IMPERIAL'S OCTOBER 13,

2006 SUPPLEMENTAL BRIEF (Docket

No. 235) AN DENYING

DEFENDANT'S EVIDENTIARY

OBJECTIONS AND MOTION TO

STRIKE (Docket No. 256)

(FILED UNER SEAL)

8 Plaintiff(s), 9 v.

10 IMERJAL BUILDING PRODUCTS, INC.,

ET AL.,

11

12

13

14

15 1.

16

Defendant(s ).

I

INTRODUCTION

Plaintiff CSL, L.L.C. ('.CSL") renews its Motion for Contempt Sanctions ("the Motion")

17 following a decision by the Ninth Circuit Court of Appeals reversing in par this Cour's decision

18 denying the MOTIon. A hearing was held on Friday, September 29, 2006, at 9:30 a.m. Followig the

19 hearing, the Court granted Defendant Imperial Building Products, Inc. ("Imperial") leave to fie a

20 supplemental brief in response to "new information" contained in CSL's reply brief. See Docket No.

21 222 (Minutes, September 29,2006). In paricular, in its reply brief, CSL offered some new

22 calculations in support of its request for damages based on actu sales figures that Imperial

23 provided, for the first time, in its opposition brief. CSL was granted leave to fie a response to

24 Imperial's supplementa brief. For the reasons stated below, the Cour finds Imperial in contempt

25 and GRANTS in part and DENIES in par CSL's request for sanctions.

26 II.

27

BACKGROUND

Since 2001, CSL has been distributing in the United States fire logs that it claims reduce

28 creosote accumulations in chimneys. Declaration of Michele Gabont in Support ofCSL's Motion

Case 3:03-cv-05566-JCS Document 296 Filed 12/05/06 Page 5 of 25
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1 for Finding of Contempt and Appropriate Sanctions ("Gaborit Deci''') at ~ 5. In the fiscal year

2 ending June 30, 2004, CSL experienced a "dramatic drop in sales." Declaration of Thomas M.

3 Neches, C.P.A. in Support ofCSL's Motion for Finding of Contempt and Appropriate Sanctions

4 ("Neches Deci'''), ~ 5. CSL's expert attributes the drop primarly to two developments: first,

5 Imperial began seIIing its SUPERS WEEP fire log during that fiscal year; and second. Duraflame

6 released a new fire log, the Flue~Renew log, that also was claimed to reduce creosote. ld.

7 In December 2003, CSL sued Imperial for false advertising and trademark infngement in

8 connection with Imperial's sale ofthe SUPERS WEEP fire log. The action was settled and a Final

9 Judgment and Injunction ("the Injunction") was entered on April 30, 2004. Under the terms of the

10 Injunction, Imperial is enjoined from: 1) representing that the SUPERSWEEP ffre log reduces

11 creosote from chimneys or is a chimney cleaning log ("Paragraph One"); and 2) using the

12 SUPERS WEEP mark on any futue fire log product uness it has the "demonstrated capabilty to

13 remove or reduce creosote in chimneys and/or aid in the loosening and breaking away of creosote

14 deposits" ("Paragraph Two").

15 In June 2004, CSL, brought a contempt motion against Imperial, asserting it had violated the

16 Injunction by continuing to seU the "SUPERS WEEP" fire log in its origial packaging. The Court

17 agreed and imposed moneta sanctions.

18 In October 2004, CSL brought a second contempt motion (the instant motion), asserting that

19 a new product that Imperial was introducing to the market - the SUPERSWEEP PLUS fire log - also

20 violated the terms of the Injunction. The Cour denied the motion on April 29, 2005, on the basis

21 that CSL had not established by clear and convincing evidence that Imperial violated either

22 Paragraph One or Paragraph Two of the Injunction.

23 In an order fied March 15, 2006, the Ninth Circuit reversed this Court's April 29, 2005

24 Order, holding that Imperial's sale of the SUPERSWEEP PLUS violated Paragraph Two of the

25 Injunction because Imperial has not demonstrated that the new product does what Imperial claims it

26 does, that is, remove creosote from chimneys. The Ninth Circuit explained: .

27

28

We construe the words "demonstrated capabilty" in the context of

determining whether Imperial was in compliance with the consent

agreement as requiring a showing that the SUPERS WEEP Plus log

2

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4 CSL, L.L.c. v. Imperial Bldg. Prods., Inc., 2006 WL 679891 (9th Cir. Mar. 15,2006).1

does what Imperial claims it does - reduce creosote. . . . The evidence

does not demonstrate that the SUPERS WEEP Plus log works. . . .We

hold that Imperial is in violation of (P)aragraph (T)wo of the consent

agreement.

5 Following entr of the Ninth Circuit's decision, Imperial continued to ship the

6 SUPERSWEEP PLUS log to "existing clients," shipping i ,056 logs between March 15, 2006 and

7 May 24,2006. See Declaration of Michael Semerak in Support of Defendants' Opposition to Motion

8 for Finding of Contempt and Appropriate Sanctions ("Semerak Deci'''), ~ i 9.

9 In an order filed on June 23,2006 ("the Cease and Desist Ordet'), this Cour enjoined all

10 fuher "sales, distrbution, display and promotion of Imperial's current SUPERSWEEP PLUS fire

11 log product." In the Cease and Desist Order, the Court ordered "that Imperial shall contact in wrting

12 all customers, retailers, and distrbutors to whom Imperial sold the curent SUPERSWEEP PLUS

13 product as well as anyone else Imperial reasonably knows has received a shipmeiit of the curent

14 SUPERSWEEP PLUS product" to notify them of the Court's order and instrct them to remove all

15 SUPERS WEEP PLUS logs from their shelves. (Docket No. 177)

16 III. The Briefs

17 A. CSL's Motion

18 CSL seeks an order finding Imperial in contempt based on its sale and marketing of the

19 SUPERSWEEP PLUS fire log in violation of the Injunction and imposing compensatory and

20 coercive sanctions. CSL requests the following compensatory sanctions: 1) CSL's lost profits

21 resulting from Imperial's sale of the SUPERSWEEP PLUS; 2) the costs incured by CSL testing the

22 SUPERS WEEP PLUS to determine whether it complied with the Injunction; and 3) attorneys' fees

23 incured in connection with the contempt motion, including the appeaL. In addition, CSL seeks the

24 following coercive sanctions: 1) an order requiring that Imperial destroy all product packaging,

25 advertising or promotional material containing the SUPERS WEEP term; 2) modification of the

26

27 1 Although this decision is unpublished, its citation is permitted here under Ninth Circuit Rule

36-3(b )(i), which permits citation of unpublished decisions "when relevant under the doctrine oflaw of

28 the case, res judicata, or collateral estoppel."

3

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1 Injunction to include a provision for coercive sanctions in the event of future violations; and 3) an

2 order requiring that if Imperial seeks to introduce a product bearing the SUPERSWEEP or any

3 similar term, it must first demonstrate to the Court that the product's ability to remove creosote in

4 chimneys.

5 1. CSL's Calculation of Lost Profits

CSL seeks to recover the profits it asserts it lost as a result ofImperials sales of the

SUPERSWEEP PLUS.2 In its opening brief, CSL sought $5,551,493.00 in lost profits - a figure

derived by CSL's expert, Thomas Neches, who at that time did not have figures regarding actual

sales of the SUPERSWEEP PLUS. See Neches DecL. at 3. Subsequently, Imperial provided CSL

with actual sales figures, resulting in a reduction of the lost profits sought by CSL to $1,548,320.00.

See Supplemental Declaration of Thomas M. Neches, CPA in Support of Finding of Contempt and

Appropriate Sanctions (''Neches Supp. DecL.") at 3. For the puroses of calculating lost profits,

CSL divided its United States customers into three categories: 1) Lowe's Companies, Inc.

("Lowe's"); 2) Ace Hardware Corporation ("Ace Hardware"); and 3) all Other Customers. Neches

DecL. at 3. After Imperial provided its actual sales figures, CSL revised its calculations for Ace

Hardware and its Other Customers but did not revise its calculation for Lowe's. CSL's calculations

regarding its alleged lost profits are described below.

a. Lowe's

Lowe's began carng CSL's fire log in 2003 and continued to carr it exclusively until July

2005. Neches DecL., ~ 8 & Ex. G. In July 2005 (fiscal 2006),3 Lowe's stopped sel1ng CSL's fire log

altogether and began selling the SUPER WEEP PLUS. ¡d. Lowe's did not carr the Duraflame fire

22 log, either before or after July 2005. ld.

23 To calculate lost profits for Lowe's, CSL began by quantifying its sales for fiscal years 2003

24 through 2006. These figues reflect that CSL's sales to Lowe's in 2003 were_ units. In 2004,

25

26 2 In this Motion, CSL does not seek lost profits resulting from Imperial's sale of the original

SUPERSWEEP fire log.

27

3 Hereinafter, all references to years refer to fiscal years, which run from July i of the previous

28 year to June 30 of the current year.

4

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these sales dropped by 1.5% to _ unts. Neches Decl., Ex. E. This was the period in which

the SUPERS WEEP and Flue-Renew products were introduced to the market, although neither

product was sold at Lowe's. In 2005, CSL's sales to Lowe's increased by 11.4%, to--d.

CSL projects that if Lowe's had not replaced CSL's product with the SUPERS WEEP PLUS

in fiscal 2006, CSL was on a track to sell--re logs to Lowe's that year. ¡d., Ex. G. This

figure is referred to as CSL's "but-for" sales to Lowe's. Neches apparently derived this figue by

assuming a rate of growt in sales to Lowe's of 16% in 2003 (although CSL actually had no growth

in sales to Lowe's in 2003 because it had not sold any logs to Lowe's in the previous year) and then

assuming for each subsequent year that growth was half the rate of the previous year. ¡d. at ~ 10 &

Ex. G. The 16% growt rate used for Lowe's for 2003 was apparently based on the actual growt in

sales to Ace Hardware in 2003.4 Using this approach, Neches found a "but-for" growth rate for 2006

of 4.3% based on a comparson ofCSL's actual 2005 sales with the but-for sales estimate for 2006.

Supplemental Declaration of Thomas M. Neches, CPA in Support of Finding of Contempt and

Appropriate Sanctions ("Neches Supp. Decl.") at 7. Neches asserts that this is a reasonable, and

even conservative estimate of but-for growth, pointing out that: 1) 4.3% growt is less than half the

rate of growth experience by CSL in its sales to Lowe's the previous year; 2) it is a lower rate of

growth than CSL experienced in its sales to Ace Hardware and its Other Customers in 2006 (10.7%

and 10.6%, respectively); and 3) it is substantially less than the_SUPERS WEEP PLUS fire

logs that were actually sold by Imperial to Lowe's in 2006. ¡d. at 8-9.

With respect to Imperial's actual 2006 sales to Lowe's, CSL's expert explains that ths

number is higher than the projected but-for sales for CSL because Imperial sold its fire log at a

slightly lower price than CSL - $9.99 rather than $14.99. Thus, CSL would be expected to "captue"

only a portion of the sales of SUPERS WEEP PLUS logs actually made by ImperiaL. ¡d. at 8. _

4 Neches does not explain in his declaration how he derived the baseline but-for growt rate used

for Lowe's for 2003, which also is not shown in Exhibit G.

5

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3 As the final step, CSL multiplies its but-for projected sales to Lowe's for 2006 _by

4 the amount of incremental profit made on each unit sold to Lowe's. Neches Decl. at 3 & Exs. F

5 (reflecting incremental lost profit) & G (showing calculation). According to CSL, the incremental

6 profit per unit for Lowe's in 2006 was _ Id, Ex. F. Using this method of calculation, the lost

7 profit for Lowe's for 2006 was $1,136,633.00. Id., Ex. G.

8 b. Ace Hardware

9 Ace Hardware began sellng CSL's fire log in 2002. Id., Ex. G. Ace Hardware introduced

10 both the SUPERS WEEP and the Duraflame fire log sometime after July 2003 but continued to sell

11 CSL's fire log as well. Id. at 3-4, ii 8. In September 2004, Ace Hardware began sellng the

12 SUPERS WEEP PLUS instead of the SUPERS WEEP and continued to sell CSL's fire logs and

13 Duraflame's Flue-Renew. Id Neches was able to provide a calculation oflost sales based on the

14 actual sales figues for the SUPERS WEEP PLUS, which were provided by Imperial with its

15 Opposition brief. The calculation is as follows.

16 In fiscal 2005 and 2006, Ace Hardware was selling CSL's fie log, the SUPERS WEEP PLUS

17 and Duraflarne's Flue-Renew. Neches Dec1. at 3-4, ii 8. In 2005, CSL sold_fire logs to Ace

18 Hardware, while Imperial sold_SUPERS WEEP PLUS rue logs. Neches Supp. DeeL., Ex. 1-2.

19 In 2006, CSL sold_fire logs to Ace Hardware, while Imperial sold_SUPERSWEEP

20 PLUS fire logs. ¡d. For each of those years, CSL asserts, CSL would have captued some of

21 Imperial's sales if the SUPERS WEEP PLUS had not been on the market. Noting that the price

22 differential at Ace Hardware is less signficant than it is at Lowe's ($12.99 versus $14.99 at Ace

23 Hardware, rather than $9.99 versus $14.99 at Lowe's), Neches concludes that the capture rate at Ace

24 Hardware is

25 Id. Neches notes that this rate is lower than the rate he would

26 have obtained using the relative prices of the two logs at Ace Hardware, which would have given rise

27 to a capture rate_Id.

28

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4 This gives rise to calculated lost

5 profits of$401,358.00 due to Imperial's sale of SUPERS WEEP PLUS fire logs to Ace Hardware.

6 c. Other Vendors

7 In 2002, CSL sold --e logs to its Other Customers. ¡d. at 9 & Ex. 1-3. In 2003,

8 CSL sold --re logs to Other Customers. ld, Ex. 1-3. In 2004, the number of sales by CSL

9 to Other Customers dropped very significantly, to_ ld. In its original calculation, CSL's

10 expert assumed that half of these lost sales were attbutable to Imperial's sale of the original

11 SUPERS WEEP fire log, but the actual sales figures subsequently provided by Imperial show that in

'ê 12 2004, Imperial sold only --re logs to CSL' s Other Customers. ld. Thus, most of drop in sales

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.~ 14 In 2005, Imperial soId"fire logs to CSL's Other Customers and in 2006, Imperial sold

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~ 15 --re logs to CSL's other customers. ld. CSL's expert estimated that the capture rate for the

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~ 16 Other Customers would have been the same as for Ace. Hardware, ld. Using this £;

& 17 rate, he then calculated that CSL would have sold logs in 2005 and

18 logs in 2006. ld. He then multiplied these "but for" additional sales by the incremental profit for

19 2005 and 2006, respectively. ld., Ex. H & 1-3. This gives rise to lost profit of

20 $10,329.00 for the Other Customers. ld.

21

22

2. Costs of Testing

CSL seeks $32,420.00 in costs incurred testing the SUPERS WEEP PLUS to determine

23 whether it reduces creosote accumulations in chimneys. See Declaration of Michael Hirsch in

24 Support ofCSL's Motion for Finding of Contempt and Appropriate Sanctions ("Hirsch DecL."), ~ 23.

25 In support of this request, CSL presents evidence that Imperial refused to provide its own test results

26 to CSL when requested to do so. ld. CSL also provides invoices from Omni Environmental

27 Services, Inc., which was hired to conduct the testing, in support of the amount sought. ld., Ex. F

28 (invoices for testing).

7

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1 3. Attorneys' Fees and Costs

2 CSL seeks $357,178.63 in attorneys' fees and costs, which includes $341,402.83 in

3 attorneys' fees and $15,775.80 in costs. See Declaration of Marc M. Gorelnk in Support ofCSL's

4 Motion for Finding of Contempt and Appropriate Sanctions ("Gorelnk DecL."). CSL has provided

5 detailed biling statements documenting its attorneys' fees and costs. ¡d., Exs. F, G~ H & 1.

6 4. Destruction of SUPERSWEEP Packaging

7 CSL asserts that Imperial should be ordered to "tur over any and all 'SUPERSWEEP' or

8 'SUPERSWEEP PLUS' packaging, promotional and sales material for destrction by a third part,

9 who wil certify the fact and quantity of material destroyed." According to CSL, ths is a wen10 established remedy in the field of trademark law and is paricularly appropriate here, where Imperial

11 was already found in contempt for shipping SUPERSWEEP logs after the Injunction was entered.

12 CSL cites to the Lanam Act, 15 V.S.C. § 1118, which authorizes courts to order the destruction of

13 packaging and advertising in the possession of the defendant that bears the trademark of the plaintiff

14 in trademark infrngement actions.

15 5. Coercive Sanctions for Future Violations

16 CSL asserts that in light ofImperial's history ofnon-complíance, the Injunction should be

17 modified to include a coercive monetar sanction, payable to the Cour. CSL calculates the amount

18 of the sanction sought based on its alleged damages over the last two years, which it asserted in the

19 motion were $7,945 for each day in which Imperial was in contempt.

20 6. Prior Court Approval for Future Products Using SUPERSWEEP Term

21 CSL also asks that the Cour require Imperial to obtain its approval approval before

22 launching any new product bearng the SUPERS WEEP tenn or any derivative of that term. CSL

23 argues that such a requirement is appropriate given Imperial's pattern ofnon-compIíance and the

24 financial burden to CSL that results ITom the lengty process of litigating contempt motions.

25 B. Imperial's Opposition

26 Imperial asserts that even though it is in contempt, its conduct does "not warant the

27 draconian sanctions requested by CSL" because it believed it was complying with the Injunction

28 based on ths Court's April 29, 2005 decision. Furher, Imperial asserts that the imposition of

8

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sanctions is inappropriate because it ceased sellng the SUPERSWEEP PLUS once the Ninth Circuit

reversed this Court's decision. Imperial responds as follows to the specific relief sought by CSL.

1. Lost Profits

Imperial asserts that CSL's calculation of lost profits is flawed in several respects. First,

Imperial asserts that CSL fails to take into account that ifImperial had not sold the SUPERS WEEP

PLUS, it would have sold a fire log with different packaging that did not use the SUPERS WEEP

tenn. In that case, Imperial asserts, many of the sales CSL claims it lost because of Imperial's

conduct would have been lost in any event and therefore canot be considered to have been caused

by its violation ofthe Injunction. Second, Imperial argues that CSL's expert erred because he used

the 2003 growth rate as a baseline for computig but-for sales rather than the growt rate in 2004,

when the SUPERS WEEP PLUS was introduced to the market. Thid, Imperial asserts that CSL

should not be awarded lost profits based on lost sales to Lowe's in 2006 because CSL has not shown

that it tred to sell its rire logs to Lowe's in that year. On a related note, Imperial points to evidence

that Lowe's chose to sell Imperial's product in par because it was one in a line of products -

something CLS apparently did not offer. Finally, Imperial provides its actual sales figures for the

period in dispute. These figues show that CSL's expert in his original declaration in support of the

Motion, overestimated the extent to which CSL' s losses were attbutable to the SUPERSWEEP

PLUS and underestimated the extent to which its losses were attbutable to Duraflame's FlueRenew in calculating its losses for Ace Hardware and its Other Customers.

2. Cost of Testing

In its Opposition brief, Imperial does not specifically oppose CSL's request for an award of

22 the costs of testing the SUPERSWEEP PLUS.

23 3. Attorneys' Fees and Costs

24 With respect to CSL's request for attorneys' fees, Imperial does not challenge any specific

25 items but argues that the award, if any, should be reduced in light of CSL' s results. In addition,

26 Imperial asserts that CSL is not entitled to attorneys' fees incurred on appeal, which may only be

27 awarded by the court of appeals.

28

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1 4. Coercive Monetary Sanctions

2 Imperial asserts that coercive monetary sanctions are unecessar because it imediately

3 stopped sellng the SUPERS WEEP PLUS after the Ninth Circuit held that sale of this product

4 violated the injunction.

5. Destruction of SUPERSWEEP Packaging

Imperial asserts that because it "took the necessary steps to stop all use of the SUPERS WEEP

mark" "immediately after" the Ninth Circuit's decision, CSL's request for destrction of packaging

and advertising materials bearng the SUPERS WEEP mark is moot.

6. Prior Court Approval for Future Products Using SUPERSWEEP Term

Similarly, Imperial asserts that CSL's request that Imperial be required to obtain Cour

approval before introducing any futue product using the SUPERS WEEP mark is "moot" because

Imperial immediately stopped sel1ng the product afer the Ninth Circuit entered its order.

C. CSL's Reply

In its Reply, CSL disputes Imperial's representations that it took all reasonable steps to

comply with the Injunction, pointing out that Imperial shipped over i ,000 SUPERS WEEP PLUS

logs, over the course of many weeks, afer the Ninth Circuit ruled that Imperial's sale of the

SUPERSWEEP PLUS violated the Injunction. CSL fuher asserts that Imperial has failed to take

reasonable steps to stop the sale of the SUPERS WEEP PLUS by retailers - and paricularly, Ace

Hardware stores - after entr of the Cease and Desist Order. In support of this point, CSL presents

evidence that Imperial failed to contact individual Ace Hardware stores to notify them of the Cease

and Desist Order as it promised the Cour it would and that, as a result, many Ace Hardware stores

were stil selling the SUPERSWEEP PLUS at the time ofCSL's Reply brief, in September 2006.

As discussed above, CSL offers in its Reply new calculations of lost profit for Ace Hardwar

and its Other Customers using Imperial's actual sales figures, which Imperial provided for the first

time in its Opposition brief. CSL rejects Imperial's assertion that in calculating lost profit, the Cour

should take into account that Imperial would have sold the same product under a different name if it

had not marketed its product as the SUPERSWEEP PLUS. CSL asserts that Imperial has improperly

imported concepts from patent law into a trdemark context and cites case law that distinguishes

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between these two bodies oflaw. CSL also presents evidence that it did attempt to sell its product to

Lowe's hardware for the 2006 fiscal year. See Declaration of Melinda Anderson in Support of

Finding of Contempt and Appropriate Sanctions ("Anderson Decl.").

CSL disagrees that its attorneys' fees should be reduced on the basis that it has not been

completely successful on the Motion. CSL does not address, however, Imperial's assertion that CSL

may not recover the attorneys' fees it incured on appeaL.

D. Imperial's September 27, 2006 Declarations

On September 27, 2006, just two days before the hearng on the Motion, Imperial fied

additional declarations addressing the reasonableness of its actions with respect to notifying retailers

of the requirements under the Cease and Desist Order.

E. The Hearing

At the hearng, on September 29, 2006, CSL notified the Cour that Ace Hardware was

planing to release a nationwide advertising supplement featung the SUPERS WEEP PLUS on

October i, 2006. CSL fuher notified the Court that it intended to file a new contempt motion based

on Imperial's alleged violations of the Cease and Desist Order. At the conclusion of the hearng, the

Court permitted Imperial to fie a supplemental brief addressing the new calculations in the

Supplemental Neches Declaration and CSLto fie a response to Imperial's supplemental brief.

F. Post-Hearig Briefs

On October 13, 2006, Imperial fied a supplemental brief. In it, Imperial makes the followig

arguments: 1) CSL has failed to explain the connections between the varous entities that market its

product and therefore has not established that CSL, rather than the entities named on the various

invoices provided as evidence of damages, has sustained any lost profits; 2) the calculation of lost

profits for Lowe's is incorrect because CSL's expert failed to take into account various Lowe'sspecific expenses CSL would have incured that would have cut into incremental profit; 3) CSL's

expert should have considered whether the use of the SUPERS WEEP mark - rather than the sale of

the product itself - caused it any damage; and 4) to the extent that CSL's expert relies on the

"capture rate" for Lowe's to corroborate its estimate of lost sales for 2006, that methodology is

28 arbitrary and speculative.

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CSL fied a response to Imperial's supplemental brief on October 27, 2006. In it, CSL argues

that Imperial's supplemental brief should be strcken because it does not address the new information

contained in CSL's Reply declarations and brief, namely~ the new calculations of lost profits for Ace

Hardware and the Other Customers that use Imperial's actual sales figures. Instead, CSL asserts,

Imperial has repeated its earlier arguments and made new arguments that should have been raised in

its Opposition brief. CSL went on to reject Imperial's arguments on the merits.

On November 8, 2006, Imperial filed Evidentiar Objections and Motion to Strike Portions

ofDec1artions of Michael Hirsch and Declaration of Michele Gaborit filed by CSL, L.L.C. in

Support of Motion for Sanctions ("Imperial Motion to Stre"). In its motion to strike, Imperial asks

the Court to strke paragraph 4 of the July 21, 2006 Hirsch Declaration, paragraph 5 of the July 20,

2006 Gaborit Declaration and paragraphs 3 and 4 of the October 27,2006 Supplemental Hirsch

Declaration on the ground that all of these purport to establish the existence of an agreement between

the various entities that market and sell Imperial's log wilIe CSL has failed to introduce into

evidence the best evidence of ths relationship - the agreement itself.

On November 13,2006, CSL fied an Opposition to Defendant Imperial's Evidentiar

Objections and Motion to Strike. In it, CSL asserts that Imperial ~s Motion to Strke is untimely to

the extent Imperial objects to declartions filed before the September 29,2006 hearg because

Imperial did not object to this evidence prior to or at that hearig. CSL fuer asserts that the

objections lack merit because the declarations to which Imperial objects do not seek to prove the

content of the agreement between CSL and the other entities but merely its import. Finally, CSL

provides a copy of the agreement to support the assertions made in the declarations to which Imperial

22 objects.

23 iv. ANAL YSIS

24 A. Imperial's Supplemental Brief and the Imperial Motion to Strike

25 As a preliminary matter, the Cour addresses CSL's assertion that the arguments raised in

26 Imperial's October 13,2006 supplemental brief were improper and should not be considered. The

27 Court agrees. All of the arguents made by Imperial in its supplemental brief were based on

28 evidence provided by CSL in support of the Motion and should have been raised in Imperial's

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1 Opposition brief. They were not. Nor were any of these issues raised at oral argument. Moreover,

2 Imperial's arguments in its supplemental briefhave nothing to do with the new information in the

3 Neches Declaration.

4 As is evident from the minutes and transcript of the September 27,2006 hearing, Imperial

5 was permitted to file a supplemental brief to address the new calculations offered by CSL in support

6 of its Reply brief, not to repeat arguments it had already made or raise new arguments that could

7 have been raised in its Opposition. Accordingly, the Court declines to consider the October 13,2006

8 brief. which is strcken from the record pursuant to Rule 12(f) of the Federal Rules of Civil

9 Procedure.5

Further, the Cour denies Imperials Motion to Strike. First, the Motion to Strke is without

merit because the Cour has determined that Imperial's new arguents, includig its arguents

regarding CSL's relationship with the entities that marketed and sold CSL's fire log in the United

States, are improper and wíl not be considered. Second, the objections are untimely to the extent

they address declarations that were fied long before the hearing. See FDIC v. New Hampshire Ins.

Co., 953 F.2d 478, 484 (9th Cir. 1991). Third, the objections lack merit because CSL offers the

declarations to show that it was paid for the logs sold on its behalfby the entities - not to prove the

content of the agreement. See R & R Assocs., Inc. v. Visual Scene, Inc., 726 F.2d 36, 38 (I st Cir.

18 1984).

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20

5 Even if the Court were to consider Imperial's new arguments, its result would be the same.

First, the questions raised by Imperial regarding the relationship between the varous entities that market

22 and distribute CSL' s fire log are adequately addressed in the Supplemental Declaration of Michael Hirsch in Support of Plaintiff CSL' s Supplemental Reply in Support of Findings of Contempt and

Appropriate Sanctions ("Hirsch Supp. DecL."), ,¡ii 3-5. Second, the Cour findsthe explanation of

23 Thomas Neches regarding his calculation of incremental profits for Lowe's to be persuasive. See Second

Supplemental Declartion of Thomas M. Neclles CPA in Support ofPlaintiffCSL' s Supplemental Reply

24 in Support of 

Findings of Contempt and Appropriate Sanctions ("Second Supp. Neches Decl."),'¡'¡ 4-5.

25 Third, Imperial's assertion that Neches should have considered whether the use of 

the SUPERSWEEP

mark - as opposed to the sale of the product - resulted in lost profits is simply a another way of statig

26 Imperial's argument that principles ofpateDt law should be applied in determning lost profits. Forthe reasons stated below, the Cour rejects that proposition. Moreover, the Inunction bared the sale of

product - a prohibition that was violated. CSL is therefore entitled to damages arising out of the sale 27 of the prohibited product. Fourh, to the extent Imperial questions the validity of the "captue rate" cited

28 by Neches in support of 

his calculation oflost profits for Lowe's, the Cour does not rely on that capture

rate.

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B. Contempt Finding

A par is in civil contempt where it disobeys a "specific and definite cour order" by failing

to "take all reasonable steps within the part's power to comply." Go-Video v. Motion Picture Ass'n

of Am. (In re Dual Deck), 10 F.3d 693, 695 (9th Cir. 1993). "There is no good faith exception to the

requirement of compliance with a cour order." ld. However, a par will not be held in contempt

where its actions were based on a "good faith and reasonable interpretation" of the order.

ld. Nor wíI a par be held in cQntempt based on "a few technical violations where every reasonable

effort has been made to comply." ld. "Congress has determined that the power to hold a part in

contempt is a discretionar power vested in the cour whose order has been violated." Crystal

Palace v. Mark Twain, 817 F.2d 1361, 1364 (9th Cir. 1987).

Imperial is in contempt of the Injunction. The Ninth Circuit held that Imperial violated

Paragraph Two of the Consent Decree but did not expressly rule that Imperial was in contempt.

Rather, it left open the possibilty that this Cour might find that Imperial took all reasonable steps to

comply with the cour's order and therefore, is not in contempt. Ths Cour declines to make such a

fiding. Imperial could easily have removed the SUPERS WEEP PLUS name from its curent

product (as it has now done) to avoid violating the injunction. Indeed, Imperial has assered in its

briefs that it could have sold just as many logs if it had used different packaging as it did when it was

using the SUPERS WEEP PLUS packaging. Furer, while Imperial has emphasized its reliance on

this Court's finding that its sale of the SUPERSWEEP PLUS did not violate the IrrUlction, it is

unable to explain why it continued to ship its product to existing customers for many weeks after the

Ninth Circuit's decision holding that sale of the product violated the Injunction. Nor is the violation

of Paragraph Two merely technicaL. Finally, Imperial conceded at the hearng that it does not contest

that it is in contempt, but rather challenges only the imposition of sanctions. Therefore, the Court

24 finds Imperial in contempt.

25 c. Appropriate Sanctions

26 "Civil contempt is characterized by the court's desire to compel obedience to a court order

27 ... or to compensate the contemnor's adversares for the injuries which result from the non28 compliance." Falstaf Brewing Corp. v. Miler Brewing Co., 702 F.2d 770, 778 (9th Cir. 1983)

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(citations omitted). To the extent a sanction is intended to be compensatory, it must be based on "the

actual losses sustained as a result of the contumacy.;' Shuffer v. Heritage Bank, 720 F.2d 1141,

1148 (9th Cir. 1983). Diffculty in quantifying damages does not bar recovery. Simpson v. Union

Oil Co. ofCal., 396 U.S. 13, 16 (1969). Rather, the wrongdoer bears the "risk of the uncertainty

which his own wrong has created." Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 265 (1946).

On the other hand, damages may not be based on "speculation or guesswork." ¡d. at 264. District

cours have "broad equitable power to order appropriate relief in civil contempt proceedings."

S.E.C. v. Hickey, 322 F.3d 1123, 1128 (9th Cir. 2003).

1. Compensatory Sanctions

a. Lost Profits

Imperial stipulated at oral argument that CSL's lost profits are an appropriate measure of

damages. It argues, however, that CSL's methodology is flawed and that in fact, the evidence shows

that its sale of the SUPERS WEEP PLUS did not result in any lost profits on the part ofCSL. For the

reasons stated below, the Court concludes that Imperial's sale of the SUPERS WEEP PLUS resulted

in lost profits to CSL in the amount of$I,136,633.00.

As a preliminar matter, the Cour rejects Imperial's assertion that CSL's calculation of butfor sales is flawed because it fails to consider that if Imperial had nÒt sold the SUPERS WEEP PLUS,

it would have sold a fire log with different packaging that did not use the SUPERSWEEP term. In

that case, Imperial asserts, many (if not all) of the sales CSL claims it lost because of Imperial's

conduct would have been lost in any event but would not have been caused by Imperial's sale of the

SUPERS WEEP PLUS.

Imperial's argument is based on the approach that is applied in patent cases for detenninig

lost profits, which requires that a patent owner seeking lost profits establish: 1) a demand for its

product; 2) the absence ofnon-inÎrnging substitutes; 3) manufactuing and marketing capabilty to

exploit that demand; and 4) the amount of profits it would have made. Opposition at 8 (citing Grain

Processing Corp. v. Am. Maize-Prods. Co., 185 F 3d 1341, 1349 (Fed. Cir. 1999)). In Grain

Processing, the court held that the plaintiff in a patent infringement action could not recover lost

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1 profits because there was evidence that a non-infnnging alterative existed and would have bcen

2 acceptable to consumers. Id. at i 355.

The approach taken in patent cases does not extend beyond that context to cases grounded in

trademark or unfair competition law - particularly where the question is one of remedy for violation

of a court order. As CSL notes, many cours have pointed to the difference between the two bodies

oflaw and particularly, the fact that in the area of trademark and unfair competition law, there is

virtually an infnite number of non-infnging alternatives. See Reply at 13 (citing wr. Rogers Co.,

Inc. v. Keene, 778 F.2d 334,339 (7th Cir. 1985)). As a result, it would be almost impossible for a

plaintiff in a trademark action to establish actual damages in the form of its own lost profits if the

approach used in patent cases were extended to trademark infgement actions. Yet lost profits are

a standard form of damages in such actions. See, e.g., Lindy Pen Co., Inc. v. Sic Pen Corp., 982

F .2d 1400, 1407 (9th Cir. 1993) (in trademark infngement actions "( d)amages are tyically

measured by any direct injury which a plaintiff can prove, as well as any lost profits which the

plaintiff would have eared but for the inmngement"). Nor does the Cour fid any trademark

infngement or unfair competition case in which courts have considered the availabíIty of noninfringing alternatives in calculating a plaintiffs actual loss.6 In any event, in the context of a

contempt proceeding, it is paricularly inappropriate for the Cour to reduce lost profits on the basis

that there would have been none had Imperial complied with the Inunction. In light of the Court's

broad authority to fashion an appropriate remedy in contempt proceedings, the Cour declines to

adopt such a rule. Therefore, the Cour rejects Imperial's reliance on patent law.

Turning to the calculations of lost profit offered by CSL, the Court agrees with CSL's

calculation of lost profits of $1,136,633.00 caused by Imperial's sales to Lowe's. First, CSL has

offered sufcient evidence to establish causation. CSL presented evidence that Lowe's cared

6 The Court is mindful that its determination of damages is guided by the rues governg civil

contempt sanctions rather than the trademark and unfair competition law on which some of CSL's

underlying claims were based. Nonetheless, the Cour may reasonably look to trademark law in

fashionig an appropriate civil contempt sanction. See Howard Johnson Co., Inc. v. Khimani, 892 F.2d

1512, 1519 (lIth Cir. 1990) (holding that distrct cour acted reasonably and withn its discretion in

looking to trademark law in determining civil contempt sanctions).

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CSL's product exclusively for the three years leading up to 2006 and that CSL attempted to sell its

product to Lowe's in 2006. See Declaration of Melinda Anderson in Support of Finding of

Contempt and Appropriate Sanctions ("Anderson DecL"), ,ir 6-9 & Exs. A, B (documenting CSL's

efforts to sell its product to Lowe's for the 2006 selling season, including a line review meeting).

Instead, Lowe's chose to replace CSL's fire log with Imperial's in 2006. While Lowe's may have

chosen Imperial's product in par because Imperial offered a line of products, CSL's evidence is

sufficient to show that if Imperial had not offered the SUPERSWEEP PLUS as one of those

products, Lowe's would have continued to carr CSL's product.

Second, the Court finds that $1,136,633.00 in lost profits from sales to Lowe's was caused by

Imperial's violation of the Injunction. While the use of a baseline 2003 growth rate of 16% for the

Lowe's calculation is questionable given that it is not based on actual growt in sales to Lowe's for a

particular period but instead appears to be based on growth in sales to Ace hardware, the Court

concludes that CSL's but-for sales projection for 2006 is reasonable nonetheless. First, looking only

to the year prior to introduction of the SUPERSWEEP PLUS at Lowe's (fiscal 2004), and comparng

it to sales in fiscal 2005, CSL's actual growth in sales for 2005 is 11.4% (sales increased from

etween 2004 and 2005). Applying the assumption that growth each year is half

that of the previous year, which Imperial has not challenged, but-for growth in 2006 would have

been 5.5%. Applying this rate to the actual sales to Lowe's for 2005 gives rise to but-for sales in

2006 of--re logs, that is, more than CSL's expert projected using his methodology.

Also, as noted by Neches in his supplemental declaration, the 4.3% but-for growth rate for

2006 is reasonable in light of the higher growth rates actualIy experienced by CSL as to Ace

Hardware and Other Customers (over 10% each) in the same year and in light of Imperial'-5 actual

sales to Lowe's of almost_fire logs.

On the other hand, the Cour concludes that the calculation used by CSL for Ace Hardware

and the Oter Customers is too speculative to support an award of damages. In particular, the Com

fids the "captue rate" used to estimate how many sales would have gone to CSL if Imperial's

product had not been on the market to be arbitrar. Although the captue rate

that rate fails to address the impact that Duraflame's

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1 product would have had on CSL's sales if the SUPERS WEEP PLUS had not been on the market.

2 b. Costs of Testing

3 CSL seeks $32,420.00 in costs incured testing the SUPERS WEEP PLUS and presents

4 evidence that Imperial refused CSL's requests for Imperial's own test results. See Declaration of

5 Michael Hirsch in Support ofCSL's Motion for Finding of Contempt and Appropriate Sanctions

6 ("Hirsch Decl."), ~ 23 & Ex. F (invoices for testing). These costs were necessarly incurred to

7 detenninewhether Imperial's sale of the SUPERS WEEP PLUS was in compliance with the

8 Injunction. Moreover, Imperial does not contest these costs in its Opposition. Therefore, these costs

9 ar~ awarded in fulL.

c. Attorneys' Fees

CSL seeks $357,178.63 in attorneys' fees, which includes the fees incured in this Cour and

on appeal in connection with its contempt motion. Imperial asserts that ths request should be

reduced on two grounds: 1) this Cour is not authoried to award fees incurred on appeal; rather,

CSL should have made its request for fees on appeal in the Ninth Circuit; and 2) the award should be

substantially reduced because CSL has accomplished very litte with its contempt motion. With

respect to the first assertion, Imperial argues that the fee request must be reduced by $239,245.00.

Imperial does not point to any specific item or amount that should be eliminated in connection with

the second argument. In its Reply, CSL does not address the question of whether this Cour is

authorized to award fees for the appeal. Nor does CSL challenge Imperial's assertion that fees for

the appeal account for $239,245.00 ofCSL's total request.? CLS argues, however, that its fees are

reasonable. The Court concludes that it may not award the fees incured on appeal but that

22 otherwse, CSL's fees are reasonable.

23 In fashioning civil contempt sanctions, the cour has the discretion to award reasonable fees

24 and costs as a remedial measure, regardless of whether the part that is in contempt acted wilfully.

25 Perry v. 0 'Donnell, 759 F.2d 702, 704-705 (9th Cir. 1985). The staring point for determining

26

27 7 At the hearing, CSL stipulated that it is not entitled to an award by tms Cour offts fees incured

28 on appeaL.

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1 reasonable fees is the calculation of the "lodestar," which is obtained by multiplying the number of

2 hours reasonably expended on litigation by a reasonable hourly rate. See Jordan v. Multnomah

3 County, 815 F.2d 1258, 1262 (9th Cir. 1987) (citing Hensley v. Eckerhart, 461 U.S. 424 (1983)). A

4 reduced fee award may be appropriate where a plaintiff achieves only partial or limited success.

5 Hensley, 461 U.S. at 436. A party seeking fees incurred on appeal must apply for those fees with the

6 cour of appeals. See Ninth Circuit Rule 39- 1.6 (governing requests for fees on appeal). Although

7 the cour of appeals may delegate the fee request to the dismct cour, the distrct court may not award

8 fees for an appeal where the court of appeals has not delegated to it that authority. Cummings v.

9 Connell, 402 F.3d 936,947-948 (9th Cir. 2005).

Here, the Cour concludes that an award of fees is necessary to provide CSL an adequate

remedy for Imperial's violation of the Injunction. Furter, in light of this Court's ruling that Imperial

is in contempt and the significant monetary sanctions it finds CSL is entitled to, no reduction of the

lodestar amount is waranted based on CSL's results. The Court does, however, decline to award

CSL's fees for the appeal, thus reducing the total fee award to $117,933.63.

Finally, the Cour has reviewed the time sheets and declarations provided in support ofCSL's

Motion and finds both the time incurred and rates sought to be reasonable. For this reason, and in

light ofImperial's failure to object to any specific time entr, the Cour awards $117,933.63 in

18 attorneys' fees.

19 2. Coercive Sanctions

20 In addition to compensatory sanctions, CSL asserts that coercive sanctions are necessary to

21 ensure future compliance with the terms ofthe injunction. In support of ths request, CSL points to

22 evidence that Imperial has failed to take reasonable steps to comply with ths Court's Cease and

23 Desist Order. In paricular, CSL points to the undisputed fact that at the time the Motion was filed

24 (and even on the date of the hearng) Imperial had not yet contacted the individual Ace Hardware

25 stores directly to recall the product. CSL also argues that Imperial could easily have done so using

26 Ace Hardware's vendor website. Consequently, as of the date of the hearig, many Ace Hardware

27 stores stí1 had the SUPERS WEEP PLUS fire logs on their shelves. See Declaration of Lisa Coen in

28 Support of Finding of Contempt and Appropriate Sanctions ("Coen Dec1."), ~, 4-8 (investigator

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visited four Ace Hardware stores in Colorado on September 6, 2006, and found SUPERS WEEP

PLUS being sold at two of them); Declaration of Jim Ells in Support of Finding of Contempt and

Appropriate Sanctions ("Ells Decl."), irir 4-11 (investigator visited six Ace Hardware stores in

Portland, Oregon, on September 7, 2006, and found SUPERS WEEP PLUS being sold at four of

them); Supplemental Declaration of Marc M. Gorelnk in Support of Finding of Contempt and

Appropriate Sanctions ("Gorelnik Supp. Dee!."), ir 4 (Gorelnik visited Ace Hardware in El Cerrto,

California, on September 1, 2006, and found SUPERS WEEP PLUS fire log being sold there). CSL

also points out that Imperial has now violated the Injunction twce and that the second violation

could have been avoided by simply developing new packagig that did not use the SUPERS WEEP

tenn - something that was done fairly quickly after the June 23,2006 Injunction was entered.

"(W)here the purose (of sanctions for civil contempt) is to make the defendant comply, the

court's discretion is. . . exercised. It must. . . consider the character and magnitude of the harm

theatened by continued contuacy, and the probable effectiveness of any suggested sanction in

bringing about the result desired." United States v. United Mine Workers of Am., 330 U.S. 258, 304

(1947). The Cour concludes that in light of Imperial's repeated violation of the Injunction, coercive

sanctions are appropriate. First, Imperial shall be required to destroy aU SUPERSWEEP PLUS

packaging - a remedy that is common in cases involving trademark infngement. See i 5 U.S.C.

§ 1118. Such a remedy is parcularly appropriate here, where Imperial previously violated the

Injunction by sellng the origial SUPERSWEEP logs after agreeing not to do so. The Cour notes

that Imperial has not objected to CSL's request that the SUPERS WEEP PLUS packaging be

destroyed.

Second, the Cour concludes that any future fire log that Imperial seeks to sell using the

SUPERS WEEP or any similar term, must obtain prior approval by the Cour. This sanction is

appropriate because Imperial has violated the Injunction twce already. Given the financial burden

on CSL of being forced to engage in lengthy litigation to ensure compliance, and in light of

Imperial's past history, such a measure is necessar to effectuate the tenns of the Injunction.

The Court declines, however, to impose coercive monetar sanctions. Imperial is already

being subjected to significant compensatory sanctions. The Court is not persuaded that the coercive

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Case 3:03-cv-05566-JCS Document 296 Filed 12/05/06 Page 24 of 25
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U1 sanction CSL would like to impose for future violations would provide any more of a deterrent than

2 already exists due to the potential for large compensatory sanctions. In addition, the Cour finds that

3 the coercive sanctions describe are adequate to ensure future compliance.

4 iv. CONCLUSION

5 The Court finds that Imperial is in civil contempt based on its sale and marketing ofthe

6 SUPERSWEEP PLUS. Monetar sanctions are awarded in the amount of$1,286,986.63. All

7 packaging, promotional, and sales materials using the SUPERS WEEP or SUPERSWEEP PLUS

8 terms shall be turned over to a third part for destrction. The April 30, 2004 Injunction shall be

9 amended to require that any future product using the SUPERS WEEP term shall require prior

10 approval by this Court based on a demonstration that the product is effective. The paries are

11 directed to meet and confer and submit a proposed stipulation to the Court withn th (30) calendar

12 days of this Order regàrding: 1) the schedule and requirements for the destuction of SUPERSWEEP

13 packaging; and 2) the specific amendments to the Injunction requiring prior Cour approval for futue

14 SUPERSWEEP fire log products.

15 IT is SO ORDERED.

16

17 Dated: November 21, 2006 .

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