The Tenth Circuit published its opinion in Klein-Becker v. Englert on Wednesday, March 27, 2013.
Klein-Becker owned the trademark StriVectin. The StriVectin line of skin care products could only be sold through authorized sellers that Klein-Becker approved and trained. Mr. Englert was never an authorized seller of StriVectin. Nonetheless, Mr. Englert sold StriVectin online without authorization.
Klein-Becker sued Patrick Englert for trademark infringement, copyright infringement, false advertising, and unfair competition under the Lanham Act; false advertising under the Utah Truth in Advertising Act; unfair competition under the Utah Unfair Practices Act; fraud; civil conspiracy; and intentional interference with existing and prospective business relations. Mr. Englert was sanctioned several times for failing to comply with court orders and discovery schedules. The third and final sanction resulted in the entry of default judgment for Klein-Becker on all remaining claims. A bench trial determined damages.
The district court entered judgment in favor of Klein-Becker for Lanham Act damages, fraud damages, stolen property, and copyright damages. The district court later issued a permanent injunction.
Mr. Englert appeals the district court’s (1) entry of default judgment against him on all existing claims as sanctions for his discovery abuses, (2) award of damages to Klein-Becker, (3) determination that Klein-Becker is entitled to a permanent injunction, (4) denial of his demand for a jury trial, and (5) denial of his request to call an unlisted witness.
(1) Entry of Default Judgment on All Claims as Sanctions for Englert’s Discovery Abuses
FRCP 37(b)(2)(A)(vi) allows a district court to issue sanctions, including default judgment against the disobedient party” when a party disobeys a discovery order. To determine if a sanction such as dismissal or default judgment is appropriate, courts should consider “(1) the degree of actual prejudice to the defendant; (2) the amount of interference with the judicial process; . . . (3) the culpability of the litigant.” Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir. 1992). Due to Mr. Englert’s continued noncompliance with discovery orders, the district court did not abuse its discretion when it entered default judgment on Klein-Becker’s claims for Englert’s discovery abuses.
Although the Tenth Circuit had not addressed the issue, other circuits have held that a district court may establish personal liability through entry of default judgment. The Tenth Circuit agreed that personal liability may be established through entry of default judgment.
(2) Damages Award
Under the Lanham Act, plaintiffs must show either actual damages or willful action on the part of the defendant as a prerequisite to recover disgorgement of profits. Because the parties agreed that Englert’s sales of StriVectin undermined the reputation and goodwill of the brand and hurt Klein-Becker’s relationships with authorized resellers, as well as their competitiveness in the cosmetics industry, the district court found that Klein-Becker established actual damages. Further, the district court found that Mr. Englert’s use of Klein-Becker’s registered mark was sufficient to support the inference that Mr. Englert acted willfully and in bad faith, entitling Klein-Becker to disgorgement of profits. Finally, equitable considerations favored judgment in favor of Klein-Becker. The district court did not err in its damages award calculation.
(3) Permanent Injunction
The Tenth Circuit agreed with the district court’s analysis of the factors for issuing an injunction: (1) actual success on the merits; (2) irreparable harm unless the injunction is issued; (3) the threatened injury outweighs the harm that the injunction may cause the opposing party; and (4) the injunction, if issued, will not adversely affect the public interest. Absent a permanent injunction barring Mr. Englert from using Klein-Becker’s trademarks or selling its products, Klein-Becker’s interests could continue to be harmed. The Tenth Circuit held that Klein-Becker’s injury outweighed any interest Mr. Englert had in continuing to violate Klein-Becker’s trademarks and found that a permanent injunction was appropriate and necessary to prevent future violations of the law.
(4) Denial of Englert’s Demand for a Jury Trial
Because he never formally objected to the magistrate judge’s ruling on his jury demand, Mr. Englert waived this argument on appeal. See United States v. One Parcel of Real Prop., 73 F.3d 1057, 1060 (10th Cir. 1996).
(5) Denial of Englert’s Request to Call an Unlisted Witness
Because Mr. Englert had not listed the witness on any of the witness lists he had submitted to the court, the Tenth Circuit concluded the district court did not abuse its discretion in denying Mr. Englert’s request to call the witness.