1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-6-1994

Woods, Inc. v. Woods, et al.

Precedential or Non-Precedential:

Docket 93-3314

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Recommended Citation

"Woods, Inc. v. Woods, et al." (1994). 1994 Decisions. Paper 73.

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UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

 

N0S. 93-3314 and 93-3333 

 

 ROBIN WOODS INC., a Pennsylvania Corporation 

v. 

ROBIN F. WOODS, an individual 

ALEXANDER DOLL COMPANY, a New York corporation 

PITTSBURGH SEED FUND 

 ROBIN F. WOODS and THE ALEXANDER DOLL COMPANY, 

Appellants 

 

On Appeal From the United States District Court 

For the Western District of Pennsylvania 

(D.C. Civil Action No. 91-02186) 

 

Argued January 12, 1994 

BEFORE: STAPLETON, COWEN and ALITO, Circuit Judges 

(Opinion Filed July 6, 1994) 

 

 

Bela A. Karlowitz 

Robert X. Medonis (Argued) 

Karlowitz & Cromer 

Suite 800, USX Tower 

Pittsburgh, PA 15219 

Attorneys for Appellee 

Gary A. Rosen (Argued) 

Hangley, Connolly, Epstein, Chicco, 

Foxman & Ewing 

1515 Market Street 

9th Floor 

Philadelphia, PA 19102 

Attorneys for Appellants 
Robin F. Woods and 

The Alexander Doll Company 

 

OPINION OF THE COURT

 

STAPLETON, Circuit Judge: 

 The district court sanctioned appellants for violating 

a preliminary injunction. Appellants dispute both the finding of 

contempt and the appropriateness of the sanctions imposed. We 

agree with the district court that appellants failed to comply 

with the preliminary injunction, but we find that one of the 

sanctions the district court imposed is inappropriate. We thus 

will affirm in part and reverse in part. 

I. 

 In 1983, Robin F. Woods ("Mrs. Woods") founded Robin 

Woods, Inc. ("RWI"), a doll manufacturer. RWI's dolls were 

popular and rapid growth ensued. Mrs. Woods obtained capital to 

finance RWI's expansion by selling most of her holdings in RWI to 

investors, among which was the Pittsburgh Seed Fund ("the Seed 

Fund"). The Seed Fund required Mrs. Woods to enter into a 

written employment agreement and a non-competition/non-disclosure 

agreement with RWI, as well as to assign her copyrights to RWI. 

 Even though RWI's sales continued to increase 

throughout the 1980s, the company never turned a profit. Unhappy 

with RWI's financial performance, the Seed Fund in 1990 

instructed its representatives on RWI's board to remove Mrs. 
Woods from her management role but to continue to employ her as a 

doll designer. Following Mrs. Woods' demotion, RWI's product 

line was also altered and new distribution channels were created. 

The Seed Fund's changes proved catastrophic, leading RWI to the 

verge of bankruptcy. Mrs. Woods offered to return as CEO to try 

to save RWI, but the Seed Fund rebuffed her. Mrs. Woods resigned 

from RWI on December 6, 1991, to go to work for one of RWI's 

competitors, the Alexander Doll Company ("Alexander"). 

 RWI filed suit against Mrs. Woods and Alexander on 

December 24, 1991, alleging Lanham Act violations, injury to 

business reputation, breach of contract, breach of fiduciary 

duty, tortious interference, breach of employment contract, and 

unfair competition. RWI also sought a preliminary injunction to 

bar Mrs. Woods from employment with Alexander or from using the 

name "Robin Woods" in connection with the design, manufacture, 

and sale of dolls. 

 After hearing four days of testimony, a magistrate 

recommended that Mrs. Woods be enjoined from involvement in the 

collectible doll industry. The district court's preliminary 

injunction expanded the magistrate's restrictions on Mrs. Woods 

by limiting use of her name: 

1. Defendants [Mrs. Woods and Alexander] 

. . . are enjoined from characterizing, 

promoting or advertising either orally or in 

writing, that any dolls manufactured by 

Alexander Doll Company for which Robin F. 

Woods provides any services 

. . . 

(g) are signed or otherwise 

identified with Robin F. Woods. 

. . . 
5. Defendants . . . are enjoined from 

designating or identifying any specific dolls 

manufactured by any company, including but 

not limited to Alexander Doll Company, for 

which Robin F. Woods provided services. 

. . . 

8. Defendants . . . are enjoined from 

identifying Robin F. Woods as having provided 

any services for any dolls manufactured by 

any company, including but not limited to the 

Alexander Doll Company, such as on the 

product, product tag, box, or in connection 

with any advertising or promotion of the 

dolls. 

 

 Mrs. Woods consulted counsel to determine what work she 

could do at Alexander and still comply with the preliminary 

injunction. Counsel told her that she could design play dolls 

(but not collectible dolls) if she used a nom de plume (but not 

her name). Mrs. Woods took the name Alice Darling and began to 

create a new line of play dolls for Alexander called "Let's Play 

Dolls." 

 An announcement of Mrs. Woods' new role was prepared 

for distribution in doll industry magazines, letters to 

retailers, and trade show posters. The announcement stated: 

ALEXANDER DOLL COMPANY 

is pleased to announce that 

MRS. ROBIN F. WOODS* 

[Photograph] 

is exclusively associated with the 

LET'S PLAY DOLLS 

division of the Alexander Doll Company 

and will be creating dolls 

for play under the name 

ALICE DARLING 

*Mrs. Woods was formerly associated with 

Robin Woods, Inc. (RWI). Mrs. Woods resigned 

from RWI in December 1991. A federal court, 

on February 7, 1992, preliminarily ruled that 

RWI owns the trade name "Robin Woods" and 
that Mrs. Woods may not use her name to 

identify any dolls which she designs. 

Accordingly, Mrs. Woods has assumed a new 

trade name "Alice Darling" to identify the 

dolls she designs for the Alexander Doll 

Company. 

 RWI filed a motion for contempt sanctions, arguing that 

the preliminary injunction forbade Mrs. Woods' involvement with 

Alexander and Let's Play Dolls. After discovery and a four-day 

hearing, the district court rejected most of RWI's contentions, 

finding only one violation of the preliminary injunction: 

dissemination of the Alice Darling announcement. The district 

court awarded RWI $107,000 in damages, which reflected the time 

and expense RWI's management incurred preparing for the contempt 

proceeding. Attorneys' fees of $68,707.52 were also awarded. 

Mrs. Woods and Alexander now appeal. 

 The district court had jurisdiction over RWI's claims 

under 28 U.S.C. § 1338 and 28 U.S.C. § 1367. This court has 

appellate jurisdiction pursuant to 28 U.S.C. § 1291. See United 

States Steel Corp. v. Fraternal Ass'n of Steel Haulers, 601 F.2d 

1269, 1272 (3d Cir. 1979). 

II. 

 The district court found that Mrs. Woods and Alexander 

did not respect the injunction in three ways. First, 

"[d]efendants promoted and advertised that dolls manufactured by 

Alexander were designed by Mrs. Woods by identifying 'Alice 

Darling' as Mrs. Woods and as the designer of 'Let's Play 
Dolls.'" Robin Woods, Inc. v. Woods, 815 F. Supp. 856, 868 (W.D. 

Pa. 1992). This, the district court said, violated paragraph one 

of the injunction which forbids "promoting or advertising . . . 

dolls manufactured by Alexander . . . which . . . are . . . 

identified with Robin F. Woods." Second, "[d]efendants, by their 

promotional campaign, designated or identified specific dolls 

manufactured by Alexander for which Mrs. Woods provided 

services." Id. This, the district court said, violated 

paragraph five of the injunction which forbids "designating or 

identifying any specific dolls . . . for which Robin F. Woods 

provided services." Third, "[d]efendants identified Mrs. Woods 

as having provided services for the dolls of the 'Let's Play 

Dolls' line . . . in . . . promotion of the doll." Id. This, 

the district court said, violated paragraph eight of the 

injunction which forbids defendants from "identifying Robin F. 

Woods as having provided any services for any dolls manufactured 

by . . . Alexander . . . in connection with . . . promotion of 

the doll." Id.

 Mrs. Woods and Alexander attack the district court's 

ruling, noting that civil contempt must be proved by clear and 

convincing evidence; where there is ground to doubt the 

wrongfulness of the conduct, they insist, there is no contempt. 

They further claim that they acted in good faith, with the advice 

of counsel, and without an intent to arrogate RWI's goodwill. 

Finally, they contend that their use of "Robin Woods" was 

arguably outside the scope of a vague injunction and consistent 

with the purpose of the injunction and that this substantial 
compliance with the injunction renders the finding of contempt 

inappropriate. We find these arguments unpersuasive. 

 Contempt, as Mrs. Woods and Alexander correctly note, 

must be proved by clear and convincing evidence: 

The plaintiff has a heavy burden to show a 

defendant guilty of civil contempt. It must 

be done by "clear and convincing evidence," 

and where there is ground to doubt the 

wrongfulness of the conduct, he should not be 

adjudged in contempt. 

Quinter v. Volkswagen of America, 676 F.2d 969, 974 (3d Cir. 

1982) (quoting Fox v. Capital Co., 96 F.2d 684, 686 (3d Cir. 

1938)). In this case, however, there is no ground to doubt the 

wrongfulness of the conduct -- the injunction forbade 

identification of Mrs. Woods with Alexander's dolls in 

promotional materials and the Alice Darling announcement made 

such an identification. 

 Contrary to Mrs. Woods' and Alexander's assertions, 

good faith is not a defense to civil contempt. We recently held 

in Harley-Davidson, Inc. v. Morris, 19 F.3d 142, 148-49 (3d Cir. 

1994), that "willfulness is not a necessary element of civil 

contempt," and, accordingly, that "evidence . . . regarding . . . 

good faith does not bar the conclusion . . . that [the defendant] 

acted in contempt." 

 Contemnors, as Mrs. Woods and Alexander correctly note, 

are sometimes excused when they violate vague court orders: there 

is a "longstanding salutary rule in contempt cases that 

ambiguities and omissions in orders redound to the benefit of the 

person charged with the contempt." Eavenson, Auchmuty & 
Greenwald v. Holtzman, 775 F.2d 535, 544 (3d Cir. 1985). This 

well established principle does not aid the appellants here, 

however. While we too perceive some vagueness in paragraph 5 of 

the injunction, the prohibitions that paragraphs 1 and 8 were 

intended to impose seem crystal clear to us. As paragraph 8 puts 

it: "Defendants . . . are enjoined from identifying Robin F. 

Woods as having provided any services for any dolls manufactured 

by . . . Alexander Doll Company . . . in connection with any 

. . . promotion of the dolls." 

 Some courts, as Mrs. Woods and Alexander correctly 

note, have recognized a substantial compliance defense to 

contempt citations: 

[S]ubstantial compliance with a court order 

is a defense to an action for civil contempt. 

. . . If a violating party has taken 'all 

reasonable steps' to comply with the court 

order, technical or inadvertent violations of 

the order will not support a finding of civil 

contempt. 

General Signal Corp. v. Donallco, Inc., 787 F.2d 1376, 1379 (9th 

Cir. 1986). Even if this court were to recognize substantial 

compliance as a defense to contempt, however, it would not apply 

to Mrs. Woods and Alexander. Although Mrs. Woods and Alexander 

acted in good faith and on the advice of counsel, see Robin 

Woods, Inc. 815 F. Supp. at 875, their violation was not 

technical or inadvertent -- they consciously chose to associate 

Mrs. Woods with dolls that Alexander would manufacture. The 

district court's contempt citation thus must stand. 
III. 

 Mrs. Woods and Alexander dispute the sanctions that the 

district court imposed on them, maintaining that it was an abuse 

of discretion to award RWI $68,505.72 in attorneys' fees and 

$107,000 in damages for the time and expense that RWI's 

management incurred in preparing for the contempt proceeding. 

"The standard of our review of a district court sanction for 

civil contempt is whether the district court abused its wide 

discretion in fashioning a remedy." Delaware Valley Citizens' 

Council v. Pennsylvania, 678 F.2d 470, 478 (3d Cir. 1982), cert. 

denied, 459 U.S. 969 (1982). 

A. 

 RWI sought attorneys' fees of $104,062.53 plus an 

expert witness fee of $11,976.00. The district court awarded 

only $68,707.52, because "plaintiff was largely unsuccessful on 

its motion for contempt, sanctions, and attorneys' fees." Mrs. 

Woods and Alexander maintain that attorneys' fees cannot be 

awarded to RWI because their conduct, even if contumacious, was 

not willful -- they acted in good faith on the advice of counsel 

without intent to harm RWI. 

 Sanctions for civil contempt serve two purposes: "to 

coerce the defendant into compliance with the court's order and 

to compensate for losses sustained by the disobedience." 

McDonald's Corp. v. Victory Investments, 727 F.2d 82, 87 (3d Cir. 

1984). Compensatory awards seek to ensure that the innocent 

party receives the benefit of the injunction: 
the Court will be guided by the principle 

that sanctions imposed after a finding of 

civil contempt to remedy past noncompliance 

with a decree are not to vindicate the 

court's authority but to make reparation to 

the injured party and restore the parties to 

the position they would have held had the 

injunction been obeyed. 

Hudson Transit Lines, Inc. v. Freund, 509 F. Supp. 1172, 1178 

(E.D.N.Y. 1981). 

 Based on this understanding of the functions served by 

sanctions for civil contempt, we reject the notion that a finding 

of willfulness is a prerequisite to an award of attorneys' fees 

against the violator of an injunction. As the Court of Appeals 

for the Fifth Circuit explained in Cook v. Ochsner Found. Hosp., 

559 F.2d 270, 272 (5th Cir. 1977): 

It matters not whether the disobedience is 

willful[;] the cost of bringing the violation 

to the attention of the court is part of the 

damages suffered by the prevailing party and 

those costs would reduce any benefits gained 

by the prevailing party from the court's 

violated order. Because damages assessed in 

civil contempt cases are oftentimes 

compensatory (instead of coercive) the mental 

state of the violator should not determine 

the level of compensation due. 

 Only with an award of attorneys' fees can RWI be 

restored to the position it would have occupied had Mrs. Woods 

and Alexander complied with the district court's injunction. 

Accordingly, accepting both the district court's findings 

regarding good faith and advice of counsel and the appellants' 

assertion that they intended no harm to RWI, we find no basis for 

disturbing the award of attorneys' fees. 
B. 

 The district court ordered Mrs. Woods and Alexander to 

pay RWI $107,000 as compensation for "management's time and 

expense in preparing for the contempt litigation." Robin Woods, 

Inc., 815 F. Supp. at 875. The court explained its decision in 

this way: "A successful party proving contempt is entitled to 

recover, by way of civil fine, the expense of investigating the 

violation of the order [and] preparing for and conducting the 

contempt proceeding, in addition to attorneys' fees." Id. 

 The $107,000 figure was based solely on the following 

testimony from RWI executive David Lamont: 

 Q. You said you spent some management 

time preparing for this hearing . . . . . 

Before coming here did you examin[e] the 

company's books and records to determine how 

much time was expended in preparing for this 

hearing today for the sanctions? 

 A. Yes, I did. 

. . . 

 Q. Let's go to how much time. You said 

you studied the time and you are familiar 

with the cost of your time. Is that correct? 

 A. Sure. . . . I look at my payroll 

records, sure. 

 Q. You are the chief financial officer 

of the company. Is that correct? 

 A. Yes. 

 Q. Now, can you tell this court how 

much money was expended by the Robin Woods 

Company on management time, in-house 

management time, in preparing for the 

sanctions hearing today? 

 . . . 

 A. Through the spring and summer, I 

kept track of the rough proportions of time 

that each of my key people were spending 

preparing for this case. I tracked it on a 

month-by-month basis, and through October it 

adds up to about $107,000. 
 Just as attorneys' fee awards are "remedial and 

designed to compensate complainants for losses incurred as a 

result of the contemnors' violations," Roe v. Operation Rescue, 

919 F.2d 857, 869 (3d Cir. 1990), so too are awards to cover the 

other expenses involved in demonstrating violations. NLRB v. 

Local 825, Int'l Union of Operating Eng'rs, AFL-CIO, 430 F.2d 

1225, 1229 (3d Cir. 1970), cert. denied, 401 U.S. 976 (1971). 

Thus, there can be no doubt that the district court had the 

authority to order Mrs. Woods and Alexander to compensate RWI for 

the time and expense its management incurred in enforcing the 

district court's injunction. 

 Turning to the amount of the award, we note that the 

district court enjoys wide, but not unlimited, discretion in 

fashioning appropriate compensatory sanctions: 

The framing of sanctions for civil contempt 

is committed to the sound discretion of the 

trial court. . . . But this discretion is 

not unlimited. Compensatory sanctions . . . 

must not exceed the actual loss suffered by 

the party that was wronged. 

 

Elkin v. Fauver, 969 F.2d 48, 52 (3d Cir. 1992), cert. denied, 

113 S. Ct. 473 (1992). 

 We believe the district court in this case stepped over 

the line that separates acceptable and unacceptable exercises of 

discretion. It reduced its award of counsel fees to reflect 

RWI's limited success and then, without explanation, proceeded to 

award all of the other expenses incurred by RWI in connection 

with its contempt motion. For this reason, on the basis of the 

record, the award of other expenses without an adjustment for the 
limited degree of RWI's success can only be characterized as 

arbitrary and we have no choice but to vacate it.1

IV. 

 We will reverse the judgment of the district court and 

remand with instructions to enter an order finding appellants in 

contempt and awarding attorneys' fees of $68,707.52. We leave to 

the discretion of the district court whether to reopen the record 

and give further consideration to the application for expenses. 

 

1Because we thus find the award of expenses arbitrary, and 

because Mr. Lamont's testimony provides no basis for allocating 

expenses between successful and unsuccessful contentions, it is 

unnecessary for us to reach the issue of whether that testimony, 

given its conclusory nature, would otherwise provide sufficient 

support for an award. We regard that issue as a very close one 

and express no opinion on it.