Opinion ID: 2403365
Heading Depth: 1
Heading Rank: 12

Heading: Post-judgment contempt proceedings

Text: On July 16, 2009, ClearOne moved to enforce the permanent injunction and for contempt. In support, ClearOne alleged that the defendants had transferred the assets of WideBand ... to a new, sham company called DialHD, Inc. (`DialHD'). Id. at D20339. ClearOne further alleged that DialHD was registered to Lonny Bowers' father, Donald Bowers, ... [was] operat[ing] out of the same Connecticut office as previously ... occupied by WideBand, and was continu[ing] the same business as WideBand, in particular selling `BoardroomHD' products that incorporated the same trade secrets and related technology that [we]re the subject of the ... Permanent Injunction. Id. ClearOne also alleged that the defendants, Donald Bowers, and WideBand employee David Sullivan ha[d] conspired and transferred, hidden, and claimed to destroy, the very Wide[B]and assets that th[e] Court ordered to be preserved in at least three orders, in addition to the Permanent Injunction. Id. On July 17, 2009, the district court directed the Appellants to appear before the court on July 31, 2009, and show cause at that time why they should not be held in contempt of the court's orders ... for the conduct described in ClearOne's motion. Id. at D20411. Although the district court's order authorized the Appellants to appear at the hearing by telephone, id. at D20412, it strongly urge[d] [them] to appear in person, id., and warned that if they did not,  they [would] be precluded from offering testimony, offering witnesses, or cross-examining witnesses, id. at D20413 (emphasis in original), and would instead be limited to listen[ing] to the evidence presented and ... mak[ing] argument on [their] own behalf, id. The district court also directed the Appellants to provide ClearOne with specific written disclosures prior to the July 31st hearing. Id. at D20414-15. On July 28, 2009, Lonny Bowers, Chiang and Yang each filed pro se motions, in letter form, asking the district court to reconsider the portion of its July 17, 2009 show cause order requiring them to appear in person. Lonny Bowers alleged, in summary fashion, that he was not able to attend th[e] hearing in person due to [his] financial situation and [his] family situation and thus requested to appear telephonically. Id. at D20589. Chiang, as a basis for his motion, cited his personal financial difficulty, his involvement in a separate court hearing in Boston on July 30, 2009, and his lack of involvement with DialHD.... Id. at D20591. Yang, as the basis for his motion, cited only his involvement in the same July 30, 2009 court hearing in Boston. Id. at D20590. The district court denied these motions, noting that each defendant had the option of appear[ing] by telephone, listen[ing] to the evidence[,] and argu[ing] on his own behalf. Id. at D20595. On July 31, 2009, ClearOne appeared at the hearing in person through counsel. Appellants appeared on their own behalf, via telephone. The district court heard testimony from three witnesses and received exhibits submitted by ClearOne. At the conclusion of the hearing, the district court issued a TRO effective immediately as of its issuance in open court. Id. at D20682. On August 5, 2009, the district court issued a written order memorializing its findings in support of the TRO. The district court found that ClearOne ha[d] demonstrated a substantial likelihood of success on the merits of its claim that [certain] DialHD Infringing Products illegally utilize[d] the Honeybee Code, and ha[d] met the other elements necessary for issuance of a TRO to preserve the status quo with regard to these products. Id. at D20683. Accordingly, the district court held that the DialHD infringing products would be considered as subject to the same restrictions as set forth in the permanent injunction order with respect to WideBand's infringing products. Id. The district court also ordered Donald Bowers and DialHD not to transfer, encumber, pledge, alienate, or try to dispose of or hide any DialHD ... assets until further order of the court. Id. at D20684. On August 17, 2009, Chiang, Yang and Lonny Bowers filed an emergency motion for reconsideration. Id. at D20852. In support, these three defendants complained that they were not allowed to cross-examine ClearOne's witnesses at the July 31, 2009 contempt hearing. Id. at D20853. These three defendants asked the district court to amend its TRO in such a way as to permit Donald Bowers and Dial[HD] ... to market, sell, manufacture, develop, modify, duplicate, and transfer DialHD products, or set[] aside ... the ... TRO in its entirety.... Id. at D20854. Alternatively, they asked for the opportunity for all parties subject to the July 17, 2009 Order to present evidence, offer testimony, and cross-examine [ClearOne]'s witnesses at a new hearing on all issues pertaining to [the] TRO.... Id. The district court denied the motion on August 31, 2009, noting that the motion raise[d] arguments the court ha[d] already heard and denied for various reasons apparent on the record and thus raise[d] nothing new and ha[d] no merit. Id. at D21401. On October 22, 2009, ClearOne moved for an order to show cause for violation of the TRO. In support, ClearOne alleged that the Appellants had failed to remove from the market certain offending products, and that a sham Chinese company was utilizing the Honeybee Code to manufacture offending products for DialHD. On October 26, 2009, the district court directed the WideBand defendants, DialHD, and David Sullivan to appear before the court on November 9, 2009, and show cause at that time why they should not be held in contempt of the court's orders ... for the conduct described in ClearOne's motion. [2] Id. at D22026. The district court prohibited any party from appearing by telephone, and provided that  [a]ny party who d[id] not appear at the November 9, 2009 hearingeither in person or through a licensed attorney who ha[d] made a formal appearance in th[e] case[would] be precluded from offering testimony, offering witnesses, or cross-examining witnesses.  Id. at D22027 (emphasis in original). On November 5, 2009, the WideBand defendants, DialHD, and David Sullivan filed a joint emergency motion to continue the November 9, 2009 show cause hearing. In support, they alleged that Lonny Bowers ha[d] contracted H1N1 Influenza, and, as such, w[ould] not be able to attend the [scheduled] hearing. Id. at D22166. The district court denied the motion to continue, but granted Lonny Bowers permission to appear by telephone to testify on direct examination and to be cross-examined. Id. at D22191. The district court held a hearing on ClearOne's motion on November 9, 2009. On November 19, 2009, the district court issued an order finding that Lonny Bowers, Yang, WideBand, and DialHD were in contempt of court for ... selling WideBand's Simphonix Si-400 product in the guise of DialHD's AEC4 and HD4551 products, all of which contain[ed] the Honeybee Code. Id. at D22291. The district court rejected the assertion by Lonny Bowers, Yang, WideBand and DialHD that an alleged `rogue' Chinese company, Longoo, was responsible for the misconduct. Id. at D22313. The district court ordered the Contemnors ... to pay attorneys' fees and damages sustained by ClearOne as a result of their contemptuous behavior. Id. The district court also (a) expanded its TRO and permanent injunction to expressly include the DialHD HD4551 product and any other DialHD product using the Honeybee Code, id. at D22351, (b) directed DialHD ... and all those working in active concert or participation with [it to] immediately halt all development, sale, and/or marketing of all DialHD products, including in China, id., (c) directed Contemnors [to] arrange for and obtain delivery to ... ClearOne ... of all code and other design materials and intellectual property covered by the permanent injunction and TRO, id. at D22352, (d) ordered Lonny Bowers to self-surrender to th[e] court on Friday, January 8, 2010 ... for incarceration ... unless and until he ha[d] proven to the court that he and WideBand ... ha[d] ... complied with the court's order to halt the development, sale, and/or marketing of all DialHD products, arranged for delivery of all infringing products to be delivered to ClearOne, made full and genuine disclosures and cooperated in discovery, id., and (e) ordered Yang to self-surrender to th[e] court on ... January 8, 2010 ... unless and until ... he ha[d] proven to the court that he ha[d] made full and genuine disclosures and cooperated in discovery, id. On January 8, 2010, the district court held a contempt hearing. Counsel for Lonny Bowers and Yang appeared at the hearing, but neither Lonny Bowers nor Yang personally appeared. After hearing arguments from counsel, the district court concluded that Lonny Bowers and Yang had failed to purge themselves of contempt, and thus issued arrest orders for them and directed that they be incarcerated until they purged themselves of contempt. On February 11, 2010, ClearOne filed an ex parte motion for the addition of Donald Bowers to the district court's November 19, 2009 contempt order and amended permanent injunction. In support, ClearOne alleged that on December 29, 2009, the bankruptcy court overseeing Donald Bowers' Chapter 7 bankruptcy proceedings lifted the automatic stay, specifically to allow the contempt proceedings against Donald Bowers to go forward. Id. at D22695. The district court denied ClearOne's motion, but issued a show cause order on April 7, 2010 directing Donald Bowers to appear personally or through counsel before the court on ... May 27, 2010 ... to show cause ... why he should not be held in contempt of the court's August 5, 2009 TRO. Id. at D22743 (emphasis in original omitted). On May 27, 2010, the district court held the scheduled show cause hearing. Donald Bowers did not appear in person, but was represented by counsel at the hearing. On August 13, 2010, the district court issued a civil contempt order and memorandum decision finding Donald Bowers in contempt of court for his acts violating the court's prohibition on possession, disclosure, use, marketing, or selling products containing ClearOne's stolen trade secret and the court's prohibition on diversion of Defendant WideBand Massachusetts' assets. Id. at D23424. More specifically, the district court found that Donald Bowers surreptitiously re-packag[ed] and s[old] products containing the stolen trade secret and participated in the diversion of WideBand Massachusetts' assets in an attempt to avoid the WideBand Defendants' obligation to pay a multi-million dollar judgment to ClearOne. Id. at D23426. The court further found that Donald Bowers ha[d] committed fraud on the court by making false statements to the court and withholding material information from the court in a manner obstructing the court's ability to enforce its orders and final judgment against the WideBand Defendants. Id. at D23424-25. In short, the district court concluded that [a]ll of the evidence [established] Donald Bowers' complete lack of regard for the jury verdict and the court's rulings. Id. at D23455. Accordingly, the district court directed that (a) the August 5, 2009 TRO be expanded to expressly include Donald Bowers, id., (b) the amended permanent injunction ... be modified and expanded to reflect the developments noted in its order, id., (c) Donald Bowers, and all those working in active concert or participation with [him]... immediately halt all development, sale, and/or marketing of all DialHD products, including in China, id., (d) Donald Bowers arrange for and obtain the delivery to the United States, care of ClearOne or its designated agent, of all code and other design materials and intellectual property covered by the Amended Permanent Injunction, id. at D23455-56, and provide written evidence to the court and ClearOne confirming that he ha[d] done so, no later than ... September 17, 2010, id. at D23456, (e) Donald Bowers ... self-surrender to th[e] court on ... October 13, 2010 ... for incarceration (or be subject to arrest through a bench warrant) unless and until he ha[d] proven to the court that he ha[d] complied with the court's directives, id., and (f) Donald Bowers pay ClearOne's reasonable attorneys' fees and costs in pursuing the contempt order against him. On that same date, August 13, 2010, the district court also issued a second amended permanent injunction against all of the defendants in the case, as well as Donald Bowers. The injunction, in pertinent part, permanently enjoined the WideBand defendants and Donald Bowers from disclosing, using or transferring in any way the ... Honeybee Code (including its unique algorithms or sub-algorithms that [we]re not in the public domain), whether in the form of source code, object code, or any other form, and any code or product substantially derived from the Honeybee Code, as well as from disclosing, using, or transferring in any way the product development documentation for the Honeybee Code or any other documentation that reveal[ed] the contents of the Honeybee Code. Id. at D23459. The injunction also listed specific infringing products, including various WideBand products, as well as DialHD['s] ... products sometimes identified as the `AEC4,' the `Mix-4' or `Automixer,' and the HD4551; and the Longoo ACON1001. Id. at D23460. On October 13, 2010, the district court held a hearing to determine whether Donald Bowers had purged himself of contempt by disclosing and providing [the] specified information and infringing products. Dist. Ct. Docket No. 2319, at 1. Based on what it characterized as the meager submission to th[e] court by Donald Bowers along with the fact that he did not appear at the hearing despite being ordered to do so, the district court found that Donald Bowers ha[d] not purged himself of contempt and [wa]s subject to arrest and incarceration in an attempt to coerce his compliance with the court's Contempt Order. Id. Consequently, that same day the district court issued a bench warrant for Donald Bowers for failure to appear before the court.