Court Opinion

ID: 168518
Source: CourtListenerOpinion
Date Created: 2010-08-14 16:34:23+00
Date Added: 2024-06-11T17:24:57.927004
License: Public Domain

F I L E D
                                                                United States Court of Appeals
                                                                        Tenth Circuit
                      UNITED STATES CO URT O F APPEALS
                                                                    December 20, 2006
                                   TENTH CIRCUIT                    Elisabeth A. Shumaker
                                                                        Clerk of Court

PH O N E DIR EC TO RIES C OM PANY,
IN C.,

          Plaintiff-Appellee,
                                                        No. 05-4257
v.                                                    (District of Utah)
                                                 (D.C. No. 2:00-CV -468-TS)
K ELLY CLA RK , an individual; THE
LOCAL PA GES, INC., a Utah
corporation,

          Defendants-Appellants.

                                OR D ER AND JUDGM ENT *

Before H E N RY , M U RPH Y, Circuit Judges, and FIG A, District Judge ** .

      After examining the briefs and the appellate record, this panel has

determined unanimously to grant the parties’ request for a decision on the briefs

without oral argument. Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is,

therefore, ordered submitted without oral argument.

      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 (eff. Dec.
1, 2006) and 10th Cir. R. 32.1 (eff. Jan. 1, 2007).
      **
        The Honorable Phillip S. Figa, United States District Judge for the
District of Colorado, sitting by designation.
I. Introduction

      Phone Directories Company, Inc. (“PDC”) filed a motion for an order

requiring The Local Pages, Inc. and Kelly Clark, its owner and president,

(collectively “The Local Pages”) to show cause why they should not be held in

contempt of court for violating a previously entered Stipulated Judgment. The

United States District Court for the District of Utah granted the motion and, after

an evidentiary hearing, entered an order of contempt against The Local Pages.

The district court concluded The Local Pages had violated four provisions of the

Stipulated Judgment. The Local Pages appeals this order of contempt, arguing (1)

the district court lacked jurisdiction to enter the order; (2) there was insufficient

evidence to support the district court’s conclusion that The Local Pages violated

the Stipulated Judgment; and (3) the district court erroneously rejected The Local

Pages’ defense of substantial compliance. This court has jurisdiction pursuant to

28 U.S.C. § 1291 and affirms the district court’s order of contempt.

II. Background

      PD C and The Local Pages are competing publishers of telephone

directories. C lark is the ow ner and president of The Local Pages. The two

companies often compete directly for yellow page advertising contracts in several

areas throughout the United States, including Vernal, Utah.

      In a previous lawsuit, PD C filed an amended complaint against The Local

Pages, alleging violations of the Lanham Act under 15 U.S.C. § 1125(a) and other

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deceptive business practices. The claim was settled pursuant to a Settlement

Agreement entered into by the parties and the entry of a Stipulated Judgment.

Under the Stipulated Judgment, both parties were enjoined from engaging in a

number of deceptive business practices. As relevant to this appeal, the parties

were enjoined from the following:

             1. Falsely representing to Customers that they are associated
      with, affiliated with, or in any way represent a Competing Entity.
             2. Falsely representing or deceptively passing off or referring to
      the Competing Entity’s telephone directory, or any part thereof, as their
      own.
             3. Falsely representing to Customers that the Competing Entity
      will no longer publish a telephone directory in a Geographical Area.
             4. Falsely representing to Customers that the Party is replacing
      the Competing Entity as the publisher of telephone directories in a
      Geographical Area.

Stipulated Judgment at 4-5.

      This dispute arises out of the alleged breach of the Stipulated Judgment by

The Local Pages. For approximately twenty years, PD C had published a

telephone directory in Vernal, Utah, entitled the “Basin Phone Directory,” without

competition from The Local Pages. The Local Pages, however, decided to

publish a competing directory in the area and began selling yellow page

advertising for its directory. Shortly thereafter, PD C filed a motion for an order

requiring The Local Pages to show cause why they should not be held in contempt

for violating the injunction set forth in the Stipulated Judgment. PD C alleged a

sales agent of The Local Pages had contacted one of PD C’s customers and

                                         -3-
claimed she represented Basin Directories, asked to schedule an appointment to

renew the customer’s advertisement, and stated she was the new Basin

Directories’ agent. The court granted the motion and held an evidentiary hearing.

      At the evidentiary hearing, PD C presented four witnesses to testify

regarding the alleged violations. These witnesses all worked for businesses that

were PDC customers at the time of the acts in question. The witnesses testified

The Local Pages’ sales representatives stated or implied they represented the

Basin D irectory and began their sales pitch by offering to renew the customers’

advertisements. Specifically, there was evidence that one representative, Bonnie

Ball, carried a PDC directory with her to sales meetings, and that another

representative faxed copies of an existing PDC ad to a customer in an effort to

confirm the content of the new ad. One witness testified Ball falsely told her

Basin Phone Directory would no longer service the area.

      In response, The Local Pages offered the testimony of Ball, who denied she

had ever made a false statement or intended to deceive PDC’s customers. It also

presented evidence of a company policy, which required all employees to read

and agree to comply with the Stipulated Judgment. Ball, however, testified she

had not read the Settlement Agreement or the Stipulated Judgment. In addition,

The Local Pages presented evidence of a Code of Conduct in its sales manual,

which included restrictions on activities not prohibited by the Stipulated

Judgment. It further presented evidence Ball had been warned for violating the

                                         -4-
Code of Conduct by bringing a competitor’s directory to sales meetings w ith

potential customers.

      Following the evidentiary hearing, the district court entered an order of

contempt, concluding PD C had proved violations of the Stipulated Judgment by

clear and convincing evidence. It found The Local Pages’ sales representatives

had engaged in conduct that violated each of the four provisions of the Stipulated

Judgment listed above. Because it concluded PDC had not presented sufficient

evidence of damages, it awarded PDC only costs and attorneys’ fees in the

amount of $15,763.00. The Local Pages now appeals the order of contempt and

the order awarding PDC its costs and attorneys’ fees.

III. Analysis

      A. Jurisdiction

      This court must first address The Local Pages’ argument that the district

court did not have jurisdiction over the contempt proceedings because PDC failed

to comply with the procedure in the Settlement Agreement before seeking judicial

intervention. Pursuant to the Settlement Agreement, the party alleging breach

must notify the other party in writing and allow ten business days for the other

party to investigate and propose a remedy. The Agreement provides, “[i]f the

parties cannot resolve an alleged breach [through these means], they may then

seek court intervention.” Because PDC initially filed its motion for order to show

                                        -5-
cause without notifying The Local Pages of the alleged breach, The Local Pages

contends the district court did not have jurisdiction to consider the motion.

      This court reviews jurisdictional questions de novo. In re Special Grand

Jury 89-2, 450 F.3d 1159, 1170 (10th Cir. 2006). In this case, the court need not

decide whether PDC adequately complied w ith the Settlement Agreement because

the district court’s jurisdiction was not contingent on the Agreement or the

parties’ compliance with its procedures. It is well-established that a court retains

ancillary jurisdiction over subsequent proceedings to enforce its own orders and

judgments. Peacock v. Thom as, 516 U.S. 349, 356 (1996). “W ithout jurisdiction

to enforce a judgment entered by a federal court, the judicial power would be

incomplete and entirely inadequate to the purposes for which it was conferred by

the Constitution.” Id. Because the contempt order was based solely on violations

of the injunction set forth in the Stipulated Judgment, the district court had

jurisdiction, independent of any provisions in a private agreement. 1   Thus, PDC’s

      1
        In support of its argument, The Local Pages cites M orris v. City of Hobart,
39 F.3d 1105 (10th Cir. 1994), for the proposition that a district court must
expressly retain jurisdiction to enforce a settlement agreement. M orris is
inapposite, however. The district court in this case did not exercise jurisdiction
over the Settlement Agreement, but instead exercised its inherent power to
enforce the terms of the Stipulated Judgment. As such, the court’s jurisdiction
over the contempt proceeding was proper, regardless of any express retention of
jurisdiction to enforce compliance.

                                          -6-
alleged failure to comply with the Settlement Agreement could not divest the

court of its inherent jurisdiction to enforce its ow n orders. 2

      B. Finding of Contempt

      This court reviews a district court’s determination of civil contempt for

abuse of discretion. FTC v. Kuykendall, 371 F.3d 745, 756 (10th Cir. 2004). A

district court has abused its discretion when its “adjudication of the contempt

proceedings is based upon an error of law or a clearly erroneous finding of fact.”

Id. The district court’s factual findings are clearly erroneous only if they are

“without factual support in the record or if the appellate court, after review ing all

the evidence, is left with a definite and firm conviction that a mistake has been

made.” M anning v. United States, 146 F.3d 808, 812 (10th Cir. 1998).

      To prevail in the district court, a plaintiff must prove, by clear and

convincing evidence: (1) a valid court order existed; (2) the defendant had

knowledge of the order; and (3) the defendant disobeyed the order. Reliance Ins.

Co. v. M ast Constr. Co., 159 F.3d 1311, 1315 (10th Cir. 1998). The Local Pages

does not dispute the validity of the Stipulated Judgment or its knowledge of the

      2
       Significantly, the Stipulated Judgment did not incorporate the procedural
provisions of the Settlement Agreement. Thus, if The Local Pages has a claim
against PDC at all, it is one for breach of contract, which it has not properly
raised on appeal. See Consumers Gas & Oil, Inc. v. Farmland Indus., Inc., 84
F.3d 367, 370 (10th Cir. 1996) (“Standing alone, a settlement agreement is
nothing more than a contract . . . .”).

                                            -7-
order. Therefore, the contempt order is proper if there is clear and convincing

evidence the Stipulated Judgment was violated.

      The district court did not abuse its discretion in finding clear and

convincing evidence The Local Pages violated the Stipulated Judgment. 3 Three

witnesses, all customers of PDC, testified at the contempt hearing that employees

of The Local Pages had represented themselves as affiliated with PD C when

making sales calls. Lisa Preece stated a Local Pages employee told her he was

with the Basin Directory and asked her to renew her yellow pages listing. Joelle

M artinsen testified Ball entered her store carrying a PDC directory and

confirmed, in response to M artinsen’s question, that it w as time for renewal.

Brad Hafen explained he also was asked to renew his subscription and was faxed

a copy of his PD C ad by The Local Pages caller. In addition to providing

evidence of false representations of affiliation, the testimony of these witnesses

supports the district court’s finding that em ployees of The Local Pages falsely

passed off the PDC directory as their ow n. It was reasonable for the district court

to find that by asking for renewals rather than new subscriptions, The Local Pages

employees implied they worked for the PDC directory, in w hich the customers

already had placed advertisements. In addition, Brandy Johnson’s testimony is

      3
       As owner and president of The Local Pages, Clark had the obligation to
prevent the corporation’s violation of the Stipulated Judgment. See FTC v.
Kuykendall, 371 F.3d 745, 759 (10th Cir. 2004). Thus, the district court’s
determination that employees of The Local Pages violated the Stipulated
Judgment is sufficient to support an order of contempt against Clark as w ell.

                                         -8-
direct evidence of false representations that PD C would no longer publish a

directory in the region and The Local Pages would be replacing it. In her

testimony, Johnson stated Ball explicitly told her the Basin Phone D irectory

would no longer be serving the Uintah Basin and The Local Pages would now

serve the region.

      In challenging the sufficiency of the evidence, The Local Pages attempts to

discount the witnesses’ testimony by noting contradictions between their

testimony at trial and at deposition. It is well-settled that determinations of

witness credibility are for the district court, and this court “will therefore not

reexamine the credibility of a witness’ testimony on appeal.” United States v.

Silvers, 84 F.3d 1317, 1328 (10th Cir. 1996). Recognizing this principle, The

Local Pages attempts to characterize its claim as a challenge to the strength of the

evidence, not its credibility. This distinction is unconvincing, however, as

challenges to the witnesses’ faulty assumptions, confusion, and contradictions go

directly to credibility. Because the district court chose to believe the witnesses’

testimony and explanations for the alleged contradictions, this court will not

disrupt the district court’s finding. Likew ise, The Local Pages’ reliance on Ball’s

testimony to controvert PDC’s witnesses is misplaced, because the district court

explicitly found Ball was not believable.

      The Local Pages also argues the hearing testimony, even if accepted as

true, does not provide sufficient evidence the Stipulated Judgment w as violated.

                                          -9-
It first points out that no provision of the Stipulated Judgment prohibits Local

Pages employees from taking a competitor’s directory into a sales meeting or

sending a copy of the customer’s ad in a competing directory. This argument

misses the point. W hile these acts are not alone violations of the Stipulated

Judgment, they are evidence of an intent to pass off PDC’s directory as their own.

The Local Pages also argues its employee’s statement that he was w ith the Basin

Directory was not a false statement because Basin Directory is a generic name

which can describe any directory in the region, including that of The Local

Pages. 4 The district court, however, determined false representations of

affiliations w ere made. Given The Local Pages’ awareness of the Basin

Directory, this finding was not clearly erroneous. Finally, this court rejects the

argument that representations to employees without purchasing power do not

amount to representations to customers. Because these employees interacted with

The Local Pages salespeople regarding the purchase of yellow pages ads, it was

not clearly erroneous for the district court to determine false representations to

these employees constituted false representations to customers.

      4
        In its brief, The Local Pages challenges the validity of PDC’s right to
“Basin Directory” as a protectable trademark. Appellant Br. at 17-18. This issue
was not argued before the district court and this court will not consider it on
appeal. See Chavez v. City of Albuquerque, 402 F.3d 1039, 1047 (10th Cir. 2005)
(“Absent extraordinary circumstances not present here, we do not address
arguments raised for the first time on appeal.” (citation omitted)). In any event,
The Local Pages agreed in the Settlement Agreement and Stipulated Judgment not
to falsely represent its affiliation with PDC, so the trademark’s legal protection is
irrelevant.

                                         -10-
       The Local Pages makes two additional challenges to the district court’s

findings, which this court also rejects. First, The Local Pages’ contention that the

district court based its finding of contempt solely on its disbelief of Ball’s

testimony is belied by the court’s oral ruling. In its ruling, the court explained its

findings were based on the testimony of PDC’s witnesses. It only noted its

disbelief of Ball to acknowledge, and discount, the competing evidence. This

court also concludes the district court’s findings were sufficient under Rule 52(a)

to allow for meaningful appellate review. The court’s oral ruling indicated which

testimony supported its findings as to each violation. Based on this reference,

this court was able to examine the witnesses’ testimony to determine whether

those findings were clearly erroneous.

       Thus, the evidence presented at the hearing adequately supported the

district court’s determination that PD C proved, by clear and convincing evidence,

The Local Pages violated the Stipulated Judgment. This court therefore concludes

the district court did not abuse its discretion in holding The Local Pages in

contem pt. 5

       5
        To the extent The Local Pages argues the district court applied the wrong
legal standard, this argument directly contradicts the court’s written conclusions
of law, in which it twice states PD C proved a violation of the injunction by clear
and convincing evidence. The district court first states, “PDC met its burden of
proving by clear and convincing evidence . . . that defendants disobeyed the
order.” It continues, “Specifically, PD C proved by clear and convincing evidence
that defendants violated Subparagraphs 1,2,3, and 4 of the injunction . . . .”
Based on these statements and the sufficiency of the evidence discussed above,
                                                                       (continued...)

                                          -11-
      C. Substantial Compliance

      W hile some courts have recognized substantial compliance as a defense in a

contempt proceeding, this court has not previously recognized the defense in a

published opinion. 6 In those courts that have recognized the defense, a defendant

who has violated a court order may avoid liability for contempt “by showing by

clear and convincing evidence that ‘all reasonable steps’ w ere taken in good faith

to ensure compliance with the court order and that there was substantial

compliance.” Bauchman v. W. High Sch., 906 F. Supp. 1483, 1494 (D. Utah

1995). The Local Pages argues it took such reasonable steps by (1) ensuring all

sales representatives received and reviewed a copy of the Stipulated Judgment

and (2) establishing and enforcing a Code of Conduct for employees that went

beyond the standards set forth in the Stipulated Judgment.

      This court need not decide whether to recognize substantial compliance as a

defense in this circuit. Assuming the defense exists, The Local Pages has failed

to prove it should apply in this case. The district court concluded that although

      5
       (...continued)
this court concludes the district court fully understood the evidentiary standard it
was required to apply.
      6
       This court has recognized a defense when a defendant shows by clear and
convincing evidence that he was “plainly and unmistakably” unable to comply
with the court order. Donovan v. Burgett Greenhouses, Inc., 759 F.2d 1483, 1486
(10th Cir. 1985). Although this defense is related to the substantial compliance
defense argued by The Local Pages, it is a separate defense, focusing on the
impossibility of compliance rather than the level of compliance achieved. The
Local Pages does not argue it w as unable to comply with the Stipulated Judgment.

                                         -12-
some steps were taken to ensure compliance w ith the Stipulated Judgment, these

steps were insufficient to constitute a defense. Specifically, the court noted

Ball’s testimony that she was never presented the Settlement Agreement or the

Stipulated Judgment for her review. 7 Because the question of whether The Local

Pages substantially complied with the court order is part of the determination of

contempt, this court reviews the district court’s conclusion for abuse of

discretion. See Hallett v. M organ, 296 F.3d 732, 750 (9th Cir. 2002).

      Given Ball’s testimony and The Local Pages’ failure to further investigate

Ball’s behavior after the alleged misconduct, the district court’s conclusion as to

the steps taken by The Local Pages w as not an abuse of discretion. Contrary to

The Local Pages’ assertions, the district court did not abuse its discretion in

concluding the existence of a policy did not alone constitute all reasonable steps

to ensure compliance. This is especially true in light of evidence the policy was

insufficient to ensure employees actually read the Stipulated Judgment. Further,

the numerous violations of the Stipulated Judgment discussed above undermine

The Local Pages’ contention that it in fact substantially complied with the court

      7
       The Local Pages argues this finding conflicts with testimony by Clark that
all employees were provided copies of the Stipulated Judgment and Settlement
Agreement. The district court’s findings indicate, however, it found a difference
between the company policy, as testified to by Clark, and the application of that
policy in this instance. Further, Ball’s written certification that she received the
Stipulated Judgment and Settlement Agreement does not make this finding clearly
erroneous because her hearing testimony directly contradicts this certification.

                                         -13-
order. Thus, the district court did not abuse its discretion in denying The Local

Pages’ substantial compliance defense. 8

IV. Conclusion

      For the foregoing reasons, this court affirm s the district court’s order of

contempt against The Local Pages and the order requiring The Local Pages to pay

PDC’s costs and attorneys’ fees.

                                       ENTERED FOR THE COURT

                                       M ichael R. M urphy
                                       Circuit Judge

      8
        The Local Pages’ reliance on Bauchman v. West High School, 906 F. Supp.
1483 (D. Utah 1995), is misplaced. In that case, the court found school
authorities had substantially complied with a court order enjoining the singing of
two religious songs at high school graduation, even though students and audience
members defied the authorities and sang the songs nevertheless. The Local Pages
attempts to liken this case to Bauchman by arguing the violation by Ball was
similarly out of its control. This case is distinguishable, however, because the
violations were not committed by unrelated third parties, as in Bauchman, but by
The Local Pages’ own employee.

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