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Fender Musical Instruments Corp. v. Swade

United States District Court, M.D. Tennessee, Nashville Division

April 7, 2017

FENDER MUSICAL INSTRUMENTS CORPORATION, Plaintiff,
v.
KELTON SWADE, INDIVIDUALLY, and KELTON SWADE, LLC, d/b/a KELTON SWADE GUITARS Defendants.

          MEMORANDUM OPINION

          KEVIN H. SHARP UNITED STATES DISTRICT JUDGE.

         Pending before the Court is a Motion to Reopen Case, to Hold Defendants in Contempt, and for Sanctions filed by Plaintiff Fender Musical Instruments Corporation (“Fender”). (Docket No. 96). Defendants Kelton Swade and Kelton Swade, LLC d/b/a Kelton Swade Guitars (collectively “Swade”) filed a Response in Opposition. (Docket No. 99). Fender filed a Reply. (Docket No. 104). The Court held hearings on the matter on February 9 and March 3, 2017. Having reviewed the briefs and court transcripts, the Court will grant Fender's motion and will find Swade in contempt of court for violating the previous consent order. The court will impose $50, 000 in sanctions.

         BACKGROUND

         Kelton Swade is a guitar luthier in Nashville, Tennessee. (Docket No. 99 at 1). Fender is a large, worldwide manufacturer of guitars and related equipment. (Docket No. 1 at 3). The shapes of Fender's headstocks are trademarked designs. (Docket No. 96-1 at 3). Specifically at issue in this case are Fender's Telecaster and Stratocaster headstock designs. In 2013, Fender initiated the present lawsuit after becoming aware of two of Swade's guitar headstock designs that Fender believed infringed Fender's Telecaster and Stratocaster headstock design trademarks: Swade's AVR-T and AVR-S designs, respectively.

         The parties came to an agreement and entered into a Confidential Settlement Agreement (“Agreement”). In the Agreement, Swade agreed to “completely cease using . . . any trademark, service mark, name, logo, design, source designation, or identifying characteristic of any kind that is a copy, reproduction, colorable imitation, or simulation of or confusingly similar to, or in any way similar to” Fender's Telecaster and Stratocaster headstock designs. (Docket No. 120 at 6) (emphasis added). This Agreement was incorporated into a Final Judgment and Permanent Injunction on Consent Order entered by this Court. (Docket No. 94). In the Permanent Injunction, the Court also expressly retained jurisdiction over the matter in order to enforce any violations of the Agreement.

         After signing the Agreement and having it incorporated into the Permanent Injunction, Swade changed the headstock designs of his AVR-T and AVR-S guitars. Swade claims his new designs “incorporate objectively identifiable changes that make them immediately distinguishable from [Fender's] Telecaster or Stratocaster guitar headstocks, ” (Docket No. 99 at 2), while Fender argues that “Swade merely made very minor modifications to his headstock designs, ” (Docket No. 96-1 at 6). The following pictures show Fender's headstock designs on top, Swade's pre-Agreement headstock designs in the middle, and Swade's post-Agreement, redesigned headstock designs on the bottom. Fender's Telecaster and Swade's AVR-T designs are on the left, while Fender's Stratocaster and Swade's AVR-S designs are on the right:

         (IMAGE OMITTED)

         Fender argues that the designs on the bottom-Swade's new, redesigned headstocks- violate section 2C of the Agreement: that Swade will not use characteristics “in any way similar to” Fender's Telecaster and Stratocaster headstocks. (Docket No. 96; Hearing Transcript, March 3, 2017 at 14:23:00).[1] Believing that Swade has violated the Agreement incorporated into the Court's Permanent Injunction, Fender filed the current motion.

         LEGAL STANDARD

         A decision on a motion for contempt lies within the sound discretion of the Court. Elec. Workers Pension Trust Fund of Local Union #58 v. Gary's Elec. Serv. Co., 340 F.3d 373, 378 (6th Cir. 2003). While the contempt power should not be used lightly, the power “‘is a necessary and integral part of the independence of the judiciary, and is absolutely essential to the performance of the duties imposed'” by law. Id. (quoting Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 450 (1911)). Contempt proceedings are used to “enforce the message that court orders and judgments are to be complied with in a prompt manner.” Id.

         To hold a litigant in contempt, “the movant must produce clear and convincing evidence that shows that ‘[the litigant] violated a definite and specific order of the court requiring him to perform or refrain from performing a particular act or acts with knowledge of the court's order.'” Id. at 379 (citing NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 588 (6th Cir. 1987)). Courts have the power to enforce terms within a settlement agreement if those terms become part of a court order “either by separate provision (such as a provision ‘retaining jurisdiction' over the settlement agreement) or by incorporating the terms of the settlement agreement in the order.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381 (U.S. 1994); see also GMC v. Ultra Golf Carts, Inc., 2005 U.S. Dist. LEXIS 8839, *7-8 (E.D. Mich. May 13, 2005) (addressing contempt in regards to the court's final judgment and permanent injunction only, and not in regards to the settlement agreement because the settlement agreement was not incorporated into the court's judgment and permanent injunction order).

         “Once the movant establishes his prima facie case, the burden shifts to the contemnor who may defend by coming forward with evidence showing that he is presently unable to comply with the court's order.” Elec. Workers Pension Trust Fund, 340 F.3d at 379 (emphasis in original). To meet this burden, the non-movant must show “‘categorically and in detail'” why he is unable to comply with the Court's order. Id. (quoting Rolex Watch U.S.A. v. Crowley, 74 F.3d 716, 720 (6th Cir. 1996)). The Court must consider whether he took all reasonable steps within his power to comply with the Court's Order. Id.

The Court has broad discretion to determine how best to enforce its injunction. In this civil contempt proceeding, the purpose of any such sanction . . . must be remedial and/or coercive, not punitive. To the extent the sanction serves a remedial function, it should compensate . . . for damages caused by . . . noncompliance.

Stryker Corp. v. Davol, Inc., 75 F.Supp.2d 741, 743 (W.D. Mich. 1999), aff'd, 234 F.3d 1252 (Fed. Cir. 2000) ...


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