Court Opinion

ID: 4672038
Source: CourtListenerOpinion
Date Created: 2021-03-26 20:00:48.717373+00
Date Added: 2024-06-11T08:02:57.764376
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        MAR 26 2021
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

OTR WHEEL ENGINEERING, INC.; et al.,            No.    19-35925

                Plaintiffs-Appellees,           D.C. No. 2:14-cv-00085-LRS

 v.
                                                MEMORANDUM*
WEST WORLDWIDE SERVICES, INC.; et
al.,

                Defendants-Appellants.

                   Appeal from the United States District Court
                     for the Eastern District of Washington
                    Lonny R. Suko, District Judge, Presiding

                          Submitted December 16, 2020**
                             San Francisco, California

Before: RAWLINSON, MURGUIA, and R. NELSON, Circuit Judges.
Partial Concurrence and Partial Dissent by Judge Rawlinson

      Appellants (collectively “West”) appeal the district court’s denial of their

motion for recovery of a cash bond based on the preliminary injunction issued on

May 14, 2014, and modified on March 18, 2015. The district court held that the

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
preliminary injunction granted in favor of Appellees (collectively “OTR”) pending

trial was not wrongful and that the injunction pending appeal, though wrongful,

was not accompanied by a sufficient showing of damages. As we find the

preliminary injunction was wrongful both pre-trial and pending appeal, we affirm

the district court in part, reverse in part, and remand so the district court can allow

discovery regarding potential injunction damages for the entire relevant time

period and consider whether that additional discovery changes its damages

analysis. We have jurisdiction under 28 U.S.C. §§ 1291 and 1292(a)(1).

      1.     “[B]efore a court may execute a bond, it must find the enjoined or

restrained party was ‘wrongfully enjoined or restrained.’” Nintendo of Am., Inc. v.

Lewis Galoob Toys, Inc., 16 F.3d 1032, 1036 (9th Cir. 1994) (quoting Fed. R. Civ.

P. 65(c)). A party is wrongfully enjoined “when it turns out the party enjoined had

the right all along to do what it was enjoined from doing.” Id. (citation omitted).

“The standard of review for an order denying a motion to execute a bond is de

novo.” Newspaper & Periodical Drivers’ & Helpers’ Union, Local 921 v. S.F.

Newspaper Agency, 89 F.3d 629, 631 (9th Cir. 1996) (citing Nintendo, 16 F.3d at

1036).

      The district court enjoined West from:

       [d]irectly or indirectly making any commercial use of OTR’s
      registered trade dress . . . for the Outrigger tire tread design, or any tire
      tread design that is confusingly similar to the Outrigger tire tread
      design; . . . using OTR’s Outrigger trade dress, or any colorable

                                           2
      imitations thereof, in connection with the sale, offer for sale, advertising
      or promotion of any goods or services; . . . manufacturing, producing,
      distributing, circulating, selling, offering for sale, advertising,
      promoting or displaying any product or service which tends to relate or
      connect such product or service in any way to OTR’s Outrigger model
      tires; . . . utilizing any of OTR’s confidential and proprietary trade
      secrets pertaining to the Outrigger model tire for any reason.
In effect, West was broadly enjoined from making commercial use of some of its

tires, including its Extremelift tires, which were the basis of OTR’s trade dress and

trade secret claims.1

      However, the injunction against West was wrongful both pre-trial and

pending appeal. When OTR’s trade dress and trade secret claims failed at trial, it

became clear that these concerns were never satisfactory reasons to enjoin West

from making commercial use of its Extremelift tires. Thus, it “turn[ed] out [West]

had the right all along to do what it was enjoined from doing.” Nintendo, 16 F.3d

at 1036. Moreover, there is no basis for treating the pre- and post-trial phases of

the injunction differently. During either period, West could have tried to sell or

otherwise commercially benefit from its Extremelift tires. As a result, West was

“wrongfully enjoined” for the purposes of its motion for bond recovery during the

      1
               OTR argues that West was only enjoined from selling its Extremelift
tires to Genie Industries (“Genie”). In addition, OTR argues that an injunction was
necessary to prevent West from benefitting from Genie’s business because it had
obtained that business through tortious interference, Washington Consumer
Protection Act violations, and false designation. But the text of the injunction does
not limit its scope to dealings with Genie or to West’s benefit from Genie’s
business.

                                           3
entire injunction period.2

      2.     When an enjoined party can show it was wrongfully enjoined, it may

be entitled to receive the “amount that the court considers proper to pay the costs

and damages sustained by” the wrongfully enjoined party, which was set aside as

security by the movant. Fed. R. Civ. P. 65(c). “[T]here is a rebuttable

presumption that [the] wrongfully enjoined party is entitled to have the bond

executed and recover provable damages up to the amount of the bond.” Nintendo,

16 F.3d at 1036. Demonstrating “provable damages” requires the party to show

“by a preponderance of the evidence that it sustained actual injury as a result of the

wrongful issuance of the preliminary injunction.” Id. at 1038 (internal quotation

marks omitted).

      Here, OTR was required to provide $3 million in security for the injunction.

The district court found that West was not wrongfully enjoined as to the pre-trial

portion of the injunction and limited discovery to the post-trial period. But the

limited nature of the record makes it unclear what portion of the $3 million, if any,

      2
              Of course, our prior modification and affirmance of the grant of the
preliminary injunction do not preclude us from finding that West was wrongfully
enjoined. “[A] preliminary injunction may be granted on a mere probability of
success on the merits. . . .” Edgar v. MITE Corp., 457 U.S. 624, 649 (1982)
(Stevens, J., concurring in part and concurring in the judgment). But a properly
granted injunction can later be found to have wrongfully enjoined a party. As a
result, the “bond, in effect, is the moving party’s warranty that the law will uphold
the issuance of the injunction.” Id.

                                          4
is potentially recoverable as “provable damages.” Id. at 1036. Because West was

wrongfully enjoined at all relevant times, the district court on remand should allow

discovery for the full period of the injunction to address the entirety of West’s

damages evidence. The district court should also address how West’s alleged

failure to mitigate damages affects its analysis. See Icicle Seafoods, Inc. v.

Worthington, 475 U.S. 709, 714 (1986) (“If the Court of Appeals believed that the

District Court had failed to make findings of fact essential to a proper resolution of

the legal question, it should have remanded to the District Court to make those

findings.”).

      AFFIRMED IN PART AND REVERSED IN PART.

                                          5
                                                                              FILED
OTR Wheel Engineering, Inc. v. West Worldwide Services, Inc., No. 19-35925
                                                                       MAR 26 2021
Rawlinson, Circuit Judge, concurring in part and dissenting in part:
                                                                           MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS
      I agree with the majority that the injunction against Defendants-Appellants

West Worldwide Services, Inc., Samuel J. West, SSL Holdings, Inc., SSL Global,

Inc., SSL China, LLC, and Qingdao STW Tire Co., Ltd. was wrongful pending

appeal. However, I do not agree with the majority’s view that the injunction was

wrongful pre-trial. The injunction enjoined the Defendants-Appellants from:

            a.     Directly or indirectly making any commercial use
            of [Plaintiff-Appellee] OTR Wheel Engineering, Inc.’s
            registered trade dress . . . for the Outrigger tire tread
            design, or any tire tread design that is confusingly similar
            to the Outrigger tire tread design;

            b.     Directly or indirectly using OTR’s Outrigger trade
            dress, or any of OTR’s trademarks or colorable imitations
            thereof, in connection with the sale, offer for sale,
            advertising or promotion of any goods or services;

            c.     Directly or indirectly: (i) manufacturing,
            producing, distributing, circulating, selling, offering for
            sale, advertising, promoting or displaying any product or
            service which tends to relate or connect such product or
            service in any way to OTR; or (ii) making any false
            description or representation of origin concerning any
            goods or services offered for sale by Defendants; and

            d.    Directly or indirectly utilizing any of OTR’s
            confidential and proprietary trade secrets for any reason.

                                         1
       When the case went to trial, the jury found that Defendants-Appellants were

liable under the Lanham Act for reverse passing off. See OTR Wheel Eng’g., Inc.

v. West Worldwide Servs., Inc., 897 F.3d 1008, 1014 (9th Cir. 2018). In other

words, the jury concluded that Defendants-Appellants represented that OTR’s tires

were actually Defendants-Appellants’ product. See id. at 1013-14. The jury

awarded OTR $967,015 in damages. See id. at 1014. At a minimum, this Lanham

Act violation fell within the portion of the injunction prohibiting Defendants-

Appellants from “making any false description or representation of origin

concerning any goods or services offered for sale by Defendants.” Accordingly, it

is not accurate to say that the injunction was wrongful pre-trial. After all, the jury

found that Defendants-Appellants acted wrongly in passing off OTR’s tires as their

own. See id. at 1013-14. For that reason, I respectfully dissent from the majority’s

conclusion that the injunction was wrongful pre-trial. I would affirm the judgment

of the district court.

                                           2