Court Opinion

ID: 2745482
Source: CourtListenerOpinion
Date Created: 2014-10-24 18:00:40.473404+00
Date Added: 2024-06-11T11:01:59.005851
License: Public Domain

Not for Publication in West's Federal Reporter

          United States Court of Appeals
                         For the First Circuit

No. 14-1242

               JL POWELL CLOTHING LLC; JL POWELL LLC,

                         Plaintiffs, Appellees,

                                       v.

                 JOSHUA L. POWELL, individually,
          d/b/a The Field, d/b/a The Field Outfitting,
               d/b/a The Field Outfitting Company,

                          Defendant, Appellant,

      BROWNELLS, INC., d/b/a The Field Outfitting Company,

                                  Defendant.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF MAINE

              [Hon. Nancy Torresen, U.S. District Judge]

                                    Before

                         Lynch, Chief Judge,
                  Selya and Barron, Circuit Judges.

     Joseph Collins, with whom DLA Piper LLP (US), Roy T. Pierce,
and Preti, Flaherty, Beliveau & Pachios, LLP were on brief, for
appellant.
     Thomas C. Newman, with whom Richard L. O'Meara, Stacey D.
Neumann, and Murray Plumb & Murray were on brief, for appellees.

                             October 24, 2014
            PER CURIAM.   This "moving target of a case" comes before

us on interlocutory appeal of a preliminary injunction entered

against Joshua L. Powell ("Joshua"), in litigation resulting from

several contracts, including an agreement between the company he

founded, JLP Retail Holding, Inc. ("Retail Holding"),1 and a new

joint venture, JL Powell LLC, formed with non-party Blue Highways

III LLC.

            A detailed recitation of the facts is not needed.    The

only issue before us is whether the district court abused its

discretion in issuing a preliminary injunction.        See TEC Eng'g

Corp. v. Budget Molders Supply, Inc., 82 F.3d 542, 544-45 (1st Cir.

1996).     Although we are permitted to resolve Joshua's motion to

dismiss when entertaining an interlocutory appeal of a preliminary

injunction, such jurisdiction is discretionary and we decline

Joshua's invitation to exercise it.      See First Med. Health Plan,

Inc. v. Vega-Ramos, 479 F.3d 46, 50 (1st Cir. 2007) (holding that

appellate review of a motion to dismiss is "permissible where the

underlying facts are undisputed, the parties have had a fair

opportunity to brief the legal issues, and the court of appeals can

resolve the case as a matter of law" (emphasis added)); see also 16

Wright & Miller, Federal Practice and Procedure § 3921.1 (3d ed.)

("The court of appeals is not required to go beyond the issues that

     1
        The original name of Joshua's company was JL Powell Inc.,
but was changed pursuant to the transaction now at issue.

                                  -2-
must   be     resolved   to   conclude   review   of   the   injunction

determination.").    Joshua's claims involve difficult questions of

state law, and the record before us is insufficiently developed to

make such review appropriate at this juncture. Cf. First Med., 479

F.3d at 50.

            To issue a preliminary injunction under Federal Rule of

Civil Procedure 65, the district court must find that the moving

party has established (1) a likelihood of success on the merits,

(2) a likelihood of irreparable harm absent interim relief, (3)

that the balance of equities is in his favor, and (4) that a

preliminary injunction is in the public interest. See Voice of the

Arab World, Inc. v. MDTV Med. News Now, Inc., 645 F.3d 26, 32 (1st

Cir. 2011) (citing Winter v. Natural Res. Def. Council, Inc., 555

U.S. 7, 20 (2008)). "Though the district court enjoys considerable

discretion in applying this test, its decision to grant or deny a

preliminary injunction must be supported by adequate findings of

fact and conclusions of law."     TEC Eng'g Corp., 82 F.3d at 544-45.

            There was no abuse of discretion as to the third and

fourth factors.    The court did not abuse its discretion in finding

that the equities tipped in the plaintiffs' favor because the court

found a likely sale, interim equitable relief is appropriate "to

foreclose attempts by the seller to 'keep for himself the essential

thing he sold,'" see Levitt Corp. v. Levitt, 593 F.2d 463, 468 (2d

Cir. 1979) (quoting Guth v. Guth Chocolate Co., 224 F. 932, 934

                                   -3-
(4th Cir. 1915)), and Joshua had failed to produce "evidence of

significant expense going forward" if such relief were granted.

Similarly, the court did not abuse its discretion in determining

that interim relief serves the public interest in enforcement of

agreements.

             The first factor, likelihood of success on the merits,

supports the preliminary injunction. In particular, Joshua has not

shown that the district court's determination rests on a clearly

erroneous assessment of fact.    Contrary to Joshua's arguments, the

district court did find that Retail Holding, not Joshua, received

the 43% stake in JL Powell LLC pursuant to the Contribution

Agreement.    The district court, in making subsequent references to

Joshua's having received a 43% stake, was being loose with its

language in articulating the exact exchange. Such looseness is not

an abuse of discretion in granting interim relief.      The parties'

positions continue to evolve, the issues are complex, and a

determination on the merits requires a more fully developed factual

record, findings, and explanations of findings.     The legal issues

governing this case are close and difficult, such that their final

resolution also requires a developed record. But we cannot say the

district court abused its discretion in finding that the plaintiffs

would likely succeed on the merits.

             But the second factor, likelihood of irreparable injury,

presents a difficulty.      The district court based its conclusion

                                  -4-
solely on the existence of a contractual provision "agree[ing] that

irreparable damage would occur" in the event of a breach, a theory

that was not presented by either party.            The court addressed the

preliminary injunction in the contract context, but not in the

trademark context, finding any relief under trademark law for the

mark "J.L. Powell" would be redundant.            It did not, for example,

make   any   factual    findings   as    to     customer   confusion.     The

plaintiffs' argument for irreparable injury did not rest on the

contractual provision alone.       Rather, they urged the court to find

likelihood of irreparable harm based on the contractual provision

combined with the lack of evidence rebutting the presumption of

such harm in intellectual property disputes of this nature, and the

impossibility or impracticability of calculating damages under the

circumstances of this case.

             Both Joshua and the plaintiffs therefore lacked notice

that the district court might short-circuit both contract and

trademark analysis by merely resting on the contractual provision.

On appeal, Joshua has argued for the first time that this was

impermissible.    The plaintiffs responded that the district court's

reliance on the contract was not an abuse of discretion given the

evidence in the record and the arguments that the plaintiffs made

below. These objections concern an important issue in the case law

about whether resting on a contractual provision of irreparable

injury   alone   is    error,   see,    e.g.,    Baker's   Aid   v.   Hussmann

                                       -5-
Foodservice Co., 830 F.2d 13, 16 (2d Cir. 1987), that none of the

parties had presented to the district court. But we do not resolve

this issue; it may, inter alia, become moot.

              On remand, we direct that the district court review the

matter of irreparable injury promptly, and vacate the preliminary

injunction if it finds irreparable harm to be lacking.                      If the

district court vacates the current injunction, it may, of course,

proceed to consider whether a more limited injunction pertaining to

the "J.L. Powell" trademark is appropriate.

              Given    the       difficulty     the   district    court's    ruling

presents, we do not vacate the injunction ourselves on appeal. The

district court appears to have relied on the contract out of

expediency, rather than because there was a lack of other support

in the record.        This is analogous to the situation we faced in TEC

Engineering Corp. v. Budget Molders Supply, Inc., 82 F.3d 542 (1st

Cir. 1996), when we remanded, without vacating, a preliminary

injunction based on an alleged trade dress violation. The district

court   had    granted       a    preliminary    injunction      after   "summarily

stat[ing] that TEC had met its burden" under the traditional

preliminary injunction test, with no finding other than that "it

believed the two products were confusingly similar."                     Id. at 545

(internal quotation marks omitted).

              Similarly, in this case, the district court found that

Section   12.13        of    the     Contribution      Agreement     demonstrated

                                         -6-
irreparable       harm,   without      explanation      of    why    the     factual

circumstances of this case support reliance on the contractual

provision.       See, e.g., Baker's Aid, 830 F.2d at 15 (recognizing

that preliminary injunctions often follow "when it appears likely

that the plaintiff will prevail in covenant-not-to-compete cases,"

depending on the facts).         There has also been no addressing of the

plaintiffs' likelihood of success on its related intellectual

property claim to the trademark "J.L. Powell" -- and so no express

finding on customer confusion (or the difficulty of establishing

the damage from any such confusion) -- that might support a finding

of irreparable harm.2           Cf. Societe des Produits Nestle, S.A. v.

Casa       Helvetia,   Inc.,     982   F.2d    633,     640   (1st    Cir.     1992)

("[I]rreparable harm flows from an unlawful trademark infringement

as a matter of law.").           But see Swarovski Aktiengesellschaft v.

Building #19, Inc., 704 F.3d 44, 54 (1st Cir. 2013).                   Because of

this, we leave the injunction in place, but remand to the district

court with instructions to "take steps expeditiously to correct the

errors."      Fryzel v. Mortg. Elec. Registration Sys., Inc., 719 F.3d

40, 46 (1st Cir. 2013) (Souter, J.).            Just as it would be unfair to

Joshua      to   uphold   the   district      court's   ruling      implicating    a

       2
        The plaintiffs brought trademark claims for violations of
two trademarks, "J.L. Powell" and "The Sporting Life."        The
district court did not reach the alleged violations of the "J.L.
Powell" trademark "[b]ecause the Plaintiffs have already
established their right to enjoin [Joshua] from using his name,"
and so any injunctive relief to protect the "J.L. Powell" mark
would, in the district court's view, have been redundant.

                                        -7-
difficult issue of which he had no notice, "it would be inequitable

to punish [the plaintiffs] for the district court's" resort to

expediency.      See Inverness Corp. v. Whitehall Labs., 819 F.2d 48,

51 (2d Cir. 1987); see also Bolduc v. Beal Bank, SSB, 167 F.3d 667,

674-75 (1st Cir. 1999).

           This leaves the related question of the breadth of the

preliminary relief ordered by the district court.          The preliminary

injunction reads:

           The Defendant is hereby PRELIMINARILY ENJOINED
           from using his name or endorsement in
           connection with his business venture The
           Field, and is directed to instruct other
           persons or entities using his name or
           endorsement in connection with [T]he Field to
           cease any such use.

Joshua has argued to us, but did not to the district court, that

the phrase "use in connection with" is overbroad and precludes him

from such things as daily ordinary use of his name. The plaintiffs

deny this was the intent.           This court directed the parties to

attempt   to     agree   upon   language   of    a   modified    preliminary

injunction, but they were unable to reach an agreement.            We direct

the   district    court,   should   it   find   irreparable     harm   and   an

otherwise sufficient basis for injunctive relief, to hear the

parties' arguments and tailor the injunction (if required) to meet

Joshua's legitimate concerns.

           "Although it would be open to this court simply to vacate

the injunction" in light of these difficulties, we think the

                                     -8-
prudent course is to permit the preliminary injunction to continue

temporarily, subject to expeditious resolutions, first of the

irreparable injury and breadth of the injunction questions, and

then of the case.   See Fryzel, 719 F.3d at 45-46.   Because "[t]his

case gives every promise of producing more trial work, and probably

further appeals, . . . . [t]he parties might . . . wish to consider

whether there is any prospect of settling the case without further

litigation."    Bolduc, 167 F.3d at 675.   In any event, this order

has attempted to protect both sides during the interim.    See id.;

see also TEC Eng'g Corp., 82 F.3d at 546.     Accordingly, we leave

the preliminary injunction temporarily in place and remand with

instructions:

          First, we direct the court on remand to address the

irreparable injury component within thirty days from the date on

which our order is docketed in the district court.       Should the

district court find irreparable harm and an otherwise sufficient

basis for injunctive relief, the district court will then hear the

parties' arguments on the appropriate scope and language of the

injunction.

          Second, unless the parties agree otherwise, we strongly

suggest the district court promptly resolve the case after a full

trial on the merits.

          So ordered.

                                -9-