Opinion ID: 787779
Heading Depth: 2
Heading Rank: 2

Heading: the disgorgement and attorney's fees orders

Text: 31 The remainder of Papanicolaou's arguments challenge only the propriety of the district court's disgorgement order. He maintains that disgorgement of profits was an improper measure of damages, and that in any event, the district court denied him due process as a result of procedural irregularities and erred in calculating the amount of damages awarded. Papanicolaou also disputes the attorney's fees order, but he conditions his argument on the fate of the district court's disgorgement order. 32 We review for abuse of discretion the district court's decision to impose sanctions for contempt, Hook v. Ariz. Dep't. of Corr., 107 F.3d 1397, 1403 (9th Cir.1997), and review for clear error the underlying findings of fact, In re Dyer, 322 F.3d at 1191. 33 Papanicolaou first maintains that Roxy's profits were the incorrect measure of damages as the profits ... from the restaurant did not result from violation of the Injunction, because revenues did not noticeabl[y] decrease after the violations were remedied. This argument undoes itself. 34 According to Papanicolaou, Roxy's Deli infringed on Jerry's Deli's trademark rights up until the date the parties settled and entered the injunction order, and benefitted from its infringement by receiving increased profits during that time. Then, as soon as the injunction order was entered, Roxy's Deli ceased infringing. Assuming these facts to be true, Papanicolaou argues, Roxy's Deli's profits should have decreased after the entry of the injunction order. 35 The problem with this approach is that it assumes that Roxy's Deli ceased infringing. This point is precisely the issue contested by Papanicolaou's appeal of the district court's contempt order. The district court found that Roxy's Deli had not, in fact, ceased infringing on Jerry's Deli's trademark rights after entry of the injunction, and consequently issued the contempt order. Because we affirm the contempt order, we must also reject Papanicolaou's circular reasoning with regard to the propriety of disgorgement as the measure of damages. We also note that disgorgement of profits is a traditional trademark remedy and the district court's use of profits as a measure for the contempt sanction is hardly a novel proposition. See, e.g., Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 514 (9th Cir.1985). 36 Papanicolaou claims that he was denied his due process right to adequate notice and an opportunity to be heard in conjunction with the district court's determination of the amount of damages. See McBride Cotton & Cattle Corp. v. Veneman, 290 F.3d 973, 982 (9th Cir.2002) (due process guarantees litigants, at the very least, notice and a meaningful opportunity to be heard). The crux of Papanicolaou's challenge is that the district court never set a firm briefing schedule or held a hearing regarding objections to the auditor's report. Admittedly, there was some ambiguity about the timing of the objections to the auditor's report. Nonetheless, Papanicolaou submitted extensive objections and documentation on two occasions — May 10 and August 1. That he might have submitted more material or objections in a different format had he had notice of a specific hearing date is of no consequence. The substance of his objections, including those offered in his motion for reconsideration, was before the district court when it ruled on the contempt sanctions. Papanicolaou had sufficient notice of his obligation to challenge the auditor's report and was offered the opportunity to be heard. 37 Papanicolaou's additional claim that the district court denied him due process because it made a speedy decision on the contempt sanction is a curious one. Papanicolaou's last objections were submitted on August 1 and the judge's decision is dated five days later, August 6. We cannot infer that a prompt decision means that the judge did not give the objections due consideration. Indeed, such a rationale would place a district court under perpetual fire. Litigants could claim that delayed decisions as well as expeditious decisions strip them of due process. In such a no-win situation, there would be no safe time frame for the district court to render a decision. We cannot offer up a magic timeline or benchmark against which to measure a considered discussion. Aspects of the disgorgement issue had been pending in one form or another for more than six months. Under the circumstances here and without something more than pure speculation, we cannot say that the decision was made without full consideration. 38 Although we are unpersuaded by Papanicolaou's constitutional argument, we are left in a quandary regarding his specific factual challenges to the profits calculation. Papanicolaou has consistently objected to the profits calculation made by the auditor. He twice submitted objections accompanied by voluminous documentation. 39 In the district court's order overruling Papanicolaou's objections and finding the appropriate amount of profits awarded to be $376,920.42, the only explanation offered was that it had reviewed the financial statements prepared by the Auditors and finds them reliable. Defendant's objections to the contrary are hereby overruled. Neither these statements nor any others in the record enable us to discern why the district court rejected Papanicolaou's substantive arguments. 40 On their face, Papanicolaou's objections cannot be dismissed with a wave of the hand. The district court accepted the auditor's profits calculations in toto, once it adjusted for the relevant time period. Although the district court ordered disgorgement as sanctions, the remedy was akin to an award of the infringer's profits under trademark law. See Frank Music Corp., 772 F.2d at 514. Under established law, once gross profits related to the infringement are established, Papanicolaou has the burden of documenting any legitimate offsets. Id. 41 On review we must consider whether the link between the profits and the violations underlying the contempt order is legally sufficient. This we cannot do on the record before us. Nor can we divine whether Papanicolaou's objections relate to legitimate offsets. Papanicolaou offers very specific objections to the particulars of the auditor's calculations, ranging from alleged math errors to the auditor's failure to offset income taxes and Papanicolaou's purported compensation. We have the parties rehashing their district court arguments and advancing their factual theories, but we have no district court findings or rationale to review on these points. The district court essentially dismissed Papanicolaou's objections in a single, conclusory sentence: Defendant's objections to the contrary are overruled. 42 Although we express no position on the merits of Papanicolaou's challenge to the profits figures, we take seriously our duty to review the district court's findings for clear error and its ultimate decision for abuse of discretion. Because we cannot determine with any degree of certainty the rationale for the district court's damages determination and because the opaqueness of the district judge's decision prevents us from undertaking a meaningful review, we remand for further consideration. See Christian v. Mattel, Inc., 286 F.3d 1118, 1121, 1131 (9th Cir.2002) (On remand, the district court will have an opportunity to delineate the factual and legal basis for its sanction orders.). The district court can likewise address the related issue of attorney's fees upon remand. 43 Accordingly, we AFFIRM in part, VACATE in part, and REMAND. Each party shall bear its own costs.