Opinion
No. 05 C 5488.
May 10, 2006
I. BACKGROUND
On September 8, 1999, the parties entered into a contract — which they called the "Covenant Vendor Agreement" — whereby Automationdirect.com ("ADC") would market touch screen panels and other products that Autotech Technologies, L.P.("Autotech") designed and manufactured specifically for ADC. The "EZTouch" touch screen panel was chief among these products. Under the agreement, Autotech granted ADC exclusive rights for all products in their worldwide sales territory, while ADC agreed that it would not sell rival products, excepting some that were being phased out. ADC also agreed to use its best efforts to distribute Autotech's products and that, upon Autotech's request, ADC would account monthly to Autotech on "customer information."
The contract, which was to run until December 31, 2004, provided for automatic renewal unless the party wishing to terminate the relationship provided timely notice — which ADC did in June 2004. Five months later, the parties entered into a second agreement that essentially continued their marketing and distribution relationship, but only for 2005 and on a non-exclusive basis. It acknowledged that the parties had an ongoing dispute over the ownership of the trademarks EZTouch and EZText. The parties' rift grew during the pendency of this new agreement, and by the time it expired on January 1, 2006, they had sued each other in separate suits in Georgia and Illinois.
During 2005, ADC attempted to market a touch screen product called "C-More." Autotech felt that ADC developed the product while the parties' original agreement was in effect, and that it was based on Autotech's proprietary technology. On April 11, 2005, ADC filed suit in the United States District Court for the Northern District of Georgia charging Autotech and others ("Autotech parties") with false advertising, copyright infringement, and trademark infringement. Autotech filed suit against ADC in Cook County Circuit Court on September 15, 2005, complaining of breach of fiduciary duty, breach of contract, and fraudulent misrepresentation. The suit was removed here a week later. The two cases were consolidated on January 31, 2006, before Judge Holderman.
A. The Parties' Consent Restraining Order
On November 23, 2005, Judge Holderman denied Autotech's motion to enjoin ADC's introduction of its new C-More touch screen. Encouraged by their victory, the Autotech parties began advertising in away that was objectionable to ADC. In December 2005, ADC sought a Temporary Restraining Order in the District Court in Georgia. The motion complained about:
1) The Autotech Parties' ongoing misrepresentations about the nature and status of the Illinois lawsuit between Autotech and ADC, including misrepresentations creating the impression that this Court had ruled that ADC had breached duties to Autotech and that ADC would not be allowed to introduce its C-More panel;
2) The Autotech Parties' false statements that ADC would no longer be distributing EZTouch operator interface panels as of January 1, 2006;
(3) The Autotech Parties' assertions that Autotech owns the EZTouch trademark; and
(4) The Autotech Parties' false statements as to consumer ratings of its EZTouch Enhanced touch panel product.
( Brief in Support of ADC's Motion for Contempt, at 3; Autotech Parties' Brief in Response, at 1-2).
On the morning ADC's motion for a TRO was to be heard by Judge Cooper, the parties negotiated a Consent Order that prohibited the Autotech parties from:
1) ". . . making a representation to any third party . . . that ADC is not authorized to sell EZTouch operator interface panels in the calendar year 2006 or that ADC otherwise does not sell EZTouch operator interface panels; however, [Autotech parties] shall be entitled to advise customers through any appropriate means that there is a dispute between ADC and [Autotech parties] about their supply relationship as of calendar year 2006;
2) ". . . making a representation to any third party . . . that contains false or misleading information concerning the status of . . . the `Illinois Lawsuit';"
3) "making a representation to any third party . . . that [Autotech parties] . . . are the owners of the "EZTouch" trademark. This restriction does not prevent [Autotech parties] usage of the mark in advertising or otherwise, but only a specific claim of ownership of the referenced trademark, during the duration of this Restraining Order."
( Brief in Support of ADC's Motion for Contempt, Ex. 2). The December 27, 2005 Consent Order, according to Autotech, "resolved all issues raised by the requested temporary restraining order," and, according to ADC, was "a relatively narrow one and focused on some specific concerns that had become evident to [ADC] in what was appearing in the advertising at that time." ( Brief in Support of ADC's Motion for Contempt, Ex. 3 at 1; Ex 4 at 7-8).
Early in its opening brief, ADC suggests that Autotech violated a fourth provision of the Consent Order that prohibited Autotech from "making a representation to any third party . . . that EZTouch Enhanced touch panel has been rated as the highest overall value PLC touch panel by any independent magazine study, unless the magazine study referred to was in fact based upon the EZTouch Enhanced touch panel. . . ." ( Brief in Support of ADC's Motion, at 3). ADC never again mentions this provision of the Consent Order and does not direct me to any alleged violation of this prohibition. Thus, any arguments on this score are waived. United States v. Johnson, 415 F.3d 728, 730 (7th Cir. 2005); United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991); McKevitt v. Pallasch, 339 F.3d 530, 533 (7th Cir. 2003) (Posner, J.).
On January 9, 2006, three days before the preliminary injunction hearing before Judge Cooper, the Autotech parties launched a new website advertising campaign. According to ADC, while Autotech had formerly referred to its primary touch screen panel as EZPanel Enhanced, it announced that the name of the product was being changed to EZTouch Enhanced. ( Brief in Support of ADC's Motion for Contempt, Declaration of Gary Marchuk (ADC business team manager), at ¶ 4). In addition, Autotech announced that it was adopting ADC's part number system to identify Autotech's competing products, which are not the same as the original products ADC promoted under those names since 2000 and sold exclusively since 2001. ( Id.). Paragraph 4 of the Consent Order explicitly permitted use in advertising of the EZTouch trademark, and there is nothing in the Order that refers to the use of products numbers.
There is no developed argument that the use of the product numbers in advertising was violative of the Consent Order.
ADC's attorney, Ms. Cahoon, immediately contacted the Autotech parties' lawyer, Mr. Sinkfield, and objected to the new advertising. By early the next day, January 10, 2006, Autotech had removed most of the objectionable new materials from the website. Because some remained, however, Ms. Cahoon communicated further with Mr. Sinkfield about whether those would be removed or whether it would be necessary for ADC to seek another TRO against the new advertising. (Brief in Support of ADC's Motion for Contempt, Declaration of Susan Cahoon, at ¶¶ 3-4). While these discussions continued, on January 10, 2006, the Autotech Parties asked Judge Cooper to postpone the scheduled January 12 preliminary injunction hearing so that they could take discovery they claimed was necessary on the question of trademark ownership. ( Brief in Support of ADC's Motion for Contempt, Ex. 3).
During an emergency telephonic hearing on the Autotech parties' motion, counsel for Autotech represented that the objectionable website materials had been posted "prematurely and by accident" and had been promptly taken down. ( ADC's Motion for Contempt, Ex. 4; Transcript at 5:7-12). He further represented that the Autotech parties would cooperate with ADC's lawyers to address any remaining concerns. ( Id., Transcript at 5:7-19). Based on those representations and the Autotech parties' stipulation that the Consent Order would remain in effect pending a preliminary injunction hearing, Judge Cooper granted the motion to postpone the hearing to allow 45 days for discovery. ( Motion for Contempt, Ex 5). Nevertheless, disputes continued, and here we are.
B. ADC's Allegations Of Contempt
ADC's initial claim is that the following post-Consent Order website advertising violates paragraph 1's prohibitions against statements that ADC is not authorized to sell or that it is not selling EZTouch products;
• [Autotech] terminated supply of EZTouch and EZText products to [ADC] effective 1/1/06;
• [Autotech] has terminated supply of EZTouch and EZText products as well as spare parts to [ADC];
• [E]ffective 1/1/06, [Autotech] will not accept any Product Returns or provide In-Warranty repairs/replacements for EZTouch or EZText products not purchased directly from its EZAutomation division; and
• [ADC's] current inventory of panels . . . is the EZTouch obsolete version 3.1 a. [Autotech] will not accept any returns on these products purchased through [ADC].
( Brief in Support of ADC's Motion for Contempt, Marchuk Decl., ¶ 4).
The second specification in ADC's motion for contempt apparently is that Autotech allowed to persist on websites misleading information about the status of the Illinois lawsuit that was contained in an October 8, 2005 press release in violation of paragraph 5 of the Consent Order. While paragraph 5 allowed an exemption for "print advertising" placed prior to December 23, 2005, it allowed no such exemption for electronic advertising. ADC complained to the website publication that had a link to the release, and it was promptly removed. (Marchuk Decl. at ¶ 10). However, as of March 9, 2006, ADC's counsel claims that he was able to find on an extended URL site the offending press release. He also contends that through a series of Google searches, he was able to the find the release — although he does not say that ADC caused the press release to appear on those sites, and ADC has denied any knowledge of their existence. When we attempted to replicate what ADC's counsel had done, we were unable to do so. It is also clear that the URL address used by ADC's counsel no longer exits.
Finally, ADC contends that Autotech has violated paragraph 4 of the Consent Order, which prohibits either party from making a "specific claim" of ownership of the EZTouch, trademark. For the reasons discussed below, it is recommended that the motion for contempt be denied.
II. ANALYSIS A. The Court's Civil Contempt Power
"`A court's civil contempt power rests in its inherent limited authority to enforce compliance with court orders and ensure judicial proceedings are conducted in an orderly manner.'" United States v. Dowell, 257 F.3d 694, 699 (7th Cir. 2001). To be held in civil contempt, a person must have violated an order or decree that sets forth in specific detail an unequivocal command. Id. at 699. Civil contempt proceedings are designed to be coercive and remedial, not punitive. Jones v. Lincoln Elec. Co., 188 F.3d 709, 738 (7th Cir. 1999). The party asserting a violation of a judicial order has the burden of proving the violation by clear and convincing evidence — which is, of course, a substantially greater burden of proof than preponderance of the evidence. Dowell, 257 F.3d at 699; Hernandez v. O'Malley, 98 F.3d 293, 295 (7th Cir. 1996). That burden also must be satisfied where the order is a negotiated consent order. Bartsh v. Northwest Airlines, Inc., 831 F.2d 1297, 1303 n. 3 (7th Cir. 1987); Tranzact Technologies, Inc. v. 1Source Worldsite, 406 F.3d 851, 854 (7th Cir. 2005).
The function of any standard of proof is to indicate the degree of confidence society thinks a factfinder should have in the correctness of factual conclusions for a particular type of adjudication. By informing the factfinder in this manner, the standard of proof allocates the risk of erroneous judgment between the litigants and indicates the relative importance society attaches to the ultimate decision. Colorado, 467 U.S. at 315-16. The requirement in cases of contempt that the evidence be clear and convincing manifests society's judgment that the risk of error is to be borne by the party seeking the contempt order and its unwillingness to allow punishment for a claimed violation of a court order, save where the evidence warrants a high degree of confidence in the correctness of the determination that a contempt has occurred.
The Supreme Court has defined clear and convincing evidence in this context as placing "in the ultimate factfinder an abiding conviction that the truth of [the movant's] factual contentions are `highly probable.'" Colorado v. New Mexico, 467 U.S. 310, 316 (1984). See also United States v. Boos, 329 F.3d 907, 911 (7th Cir. 2003). The standard is met "only if the material . . . offered instantly tilted the evidentiary scales in the affirmative when weighed against the evidence . . . offered in opposition." Colorado, 467 U.S. at 316. It is not necessary to a finding of contempt that a violation was "willful." It is enough that a party "has not been reasonably diligent and energetic in attempting to accomplish what was ordered." Goluba v. School Dist. of Ripon, 45 F.3d 1035, 1037 (7th Cir. 1995).
B. The Interpretation Of Consent Orders Generally
Although they have the force of a court order, consent orders are a form of contract to be construed according to the basic principles of contract interpretation. United States v. ITT Continental Baking Co., 420 U.S. 223, 238 (1975); Goluba, 45 F.3d at 1037. As with all contracts, the ultimate question is what was the parties' mutual intent. The answer to that question is to be found "within [the consent order's] four corners, and not by reference to what might satisfy the purposes of one of the parties to it." United States v. Armour Co., 402 U.S. 673, 682 (1971). As the Supreme Court explained in Armour:
Consent decrees are entered into by parties to a case after careful negotiation has produced agreement on their precise terms. The parties waive their right to litigate the issues involved in the case and thus save themselves the time, expense, and inevitable risk of litigation. Naturally, the agreement reached normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with the litigation. Thus the decree itself cannot be said to have a purpose; rather the parties have purposes, generally opposed to each other, and the resultant decree embodies as much of those opposing purposes as the respective parties have the bargaining power and skill to achieve.402 U.S. at 681-82.
Since a consent order reflects the compromise of the parties' inevitably clashing and divergent interests, it cannot be construed as though it were a reflection of the maximum aspirations of one side or a reflection of what might have been achieved had the particular issues resolved by the consent order been played out to their ultimate conclusion. White v. Roughton, 689 F.2d 118, 119-20 (7th Cir. 1982). See also Alliance to End Repression v. City of Chicago, 119 F.3d 472, 475 (7th Cir. 1997); Armour, 402 U.S. at 682.
Although not expressly articulated this way, ADC's position, in essence, is that it is entitled to the order it might have obtained had it gone through with the TRO hearing and prevailed. Indeed, the handful of cases that it string-cites all involved orders entered after a victory by one of the parties. Instead of discussing Armour and the wealth of cases in this Circuit dealing with consent orders, ADC inexplicably resorted to non-consent order cases. See United States v. Christie Industries, Inc., 465 F.2d 1002, 1005 (3rd Cir. 1972) (court granted government's motion for preliminary injunction); United States v. Greyhound Corp., 508 F.2d 529, 531 (7th Cir. 1974) (court granted government's motion to enforce Interstate Commerce Commission's order); Grove Fresh Distributors, Inc. v. John Labatt Ltd., 888 F.Supp. 1427, 1433 (N.D.Ill. 1995) (court granted motion to seat case). In short, the cases on which ADC relies are not remotely comparable to the present case. Ignoring controlling and obviously pertinent authority as though it did not exist is, as the Seventh Circuit has said, "pointless." Fred A. Smith Lumber Company v. Edidin, 845 F.2d 750, 753 (7th Cir. 1988).
C. The Interpretation Of The ADC-Autotech Parties' Consent Order 1. The "not authorized to sell . . . or . . . otherwise does not sell" Provision
Paragraph 1 of the Consent Order allowed Autotech to inform customers "through any appropriate means that there is a dispute between ADC and [Autotech] about their supply relationship as of calendar year 2006." It simultaneously prohibited Autotech from representing "that ADC is not authorized to sell EZTouch operator interface panels in the calendar year 2006 or that ADC otherwise does not sell EZTouch operator interface panels." The following statements that appeared on Autotech's website are claimed to be violative of paragraph 1:
• [Autotech] terminated supply of EZTouch and EZText products to [ADC] effective 1/1/06;
• [Autotech] has terminated supply of EZTouch and EZText products as well as spare parts to [ADC];
• [E]ffective 1/1/06, [Autotech] will not accept any Product Returns or provide In-Warranty repairs/replacements for EZTouch or EZText products not purchased directly from its EZAutomation division; and
• [ADC's] current inventory of panels . . . is the EZTouch obsolete version 3.1a. [Autotech] will not accept any returns on these products purchased through [ADC].
Deleted from the actual quotation from the website is this: "(quantity ?)".
The first two paragraphs state in unambiguous terms that as of June 1, 2006, Autotech will no longer be supplying ADC with either EZTouch/EZText products or spare parts. When read in isolation, the first two statements arguably leave the impression — although they do no say so explicitly — that after January 1, 2006 ADC would no longer be selling EZTouch/EZText products. Since sophisticated, as well as subtle modes of evasion of court orders are equally prohibited, if the sum and substance of the website consisted only of the first two paragraphs, there might be some force to the claim that Autotech had slyly violated the consent decree — although it is by no means certain that standing alone this constitutes clear and convincing evidence of a violation of paragraph 1 of the Consent Order. But, as with all language, the first two paragraphs must be read in the animating context of other portions of the website and in the context of the successive paragraphs, for the principle determinant of the meaning of all language is context. Scalia, A Matter of Interpretation: Federal Courts and the Law, 135 (1997).
See Textrom Lycoming Reciprocating Engine Division v. United Automobile, Aerospace Agricultural Implement Workers of America Intern. Union, 523 U.S. 653, 657 (1998); In re Payne, 431 F.3d 1055, 1058-59 (7th Cir. 2005) (Posner, J.); Alliance to End Repression v. City of Chicago, 742 F.2d 1007, 1010-1011 (7th Cir. 1984) ( en banc) (Posner, J.). Perhaps the most lambent phrasing of the principle is that of Justice Holmes in Towne v. Eisner, 245 U.S. 418, 425 (1918) ("A word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary in color and content according to the circumstances and the time in which it is used.").
When the first two statements about which ADC complains are read in the context of the last two statements, they take on a different cast. The reader is informed that ADC has an "inventory" of panels that it will be selling in 2006, although that inventory has been rendered "obsolete" by Autotech's new EZTouch Enhance panels. Only "[t]he latitudinarian attitude of Alice in Wonderland toward language" could suggest that telling someone that ADC will be selling a product is declaring that ADC is not authorized to sell or otherwise will not be selling that very product. National Mutual Insurance Co. v. Tidewater Transfer Co., 337 U.S. 582, 654 (1949) (Frankfurter, J., dissenting).
The message is not that ADC is not authorized to sell "EZTouch panels" in calendar 2006, but that buyers can get a better, newer, and warrantied product by buying the 4.1a version from Autotech — rather than the 3.1a version from ADC — and that Autotech will be the exclusive distributor for the new product. Thus, the website states that Autotech "will no longer manufacture the older EZTouch (rev. 3.1a) sold through AutomationDirect.com," and that it "will also phase out the EZ panel over the first quarter of 2006. Instead, [Autotech] will manufacture only the EZTouch Enhanced (rev.4.1a or later), sold exclusively through its EZAutomation division." The website goes on to "advise users to buy the replacement and spare parts for [the older versions of EZTouch and EZText panels] . . . Factory Direct, and save up to 25% in cost and have the security of life time support directly from the Manufacturer."
The third and fourth complained of statements merely inform the reader that effective January 1, 2006, Autotech will not accept any product returns or provide warranty repairs/replacements for the obsolete EZTouch or EZText products not purchased from its EZAutomation division. The reader is informed that existing obsolete products can be "convert[ed]" to "EZTouch Enhanced for a fixed fee" with "a Fresh 2 yr. warranty Factor Direct." It is a contradiction in terms to say that telling prospective consumers that purchases of the version 3.1a EZTouch product from ADC will not receive warranty coverage from Autotech is to inform them that ADC will not be selling the product or that it is not authorized to sell its obsolete inventory.
The website "Strongly Recommends EZTouch users to buy EZTouch Enhanced (Version 4.1a) factory direct from its EZAutomation division, and enjoy a 25% price savings "over the older EZTouch through AutomationDirect.com and a 2 year warranty "Direct from the Manufacturer." The website points out that EZTouch is made in America while ADC's "C-More is made in China. . . ."
Informing prospective customers that they have a choice, and explaining why they would be wiser to buy from Autotech is the essence of permissible competitive behavior. Cf. Jeffrey M. Perloff, Microeconomics, 73 (2nd ed. 2001). Consumers benefit from having access to information and society as a whole benefits from the heightened competition that results when consumers are better informed about their consumption choices. Compare Till v. SCS Credit Corp., 541 U.S. 465, 482 (2004); Greater New Orleans Broadcasting Association v. United States, 527 U.S. 173, 184 (1999); Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985). This is not to say that competitive behavior cannot be constrained by an agreed consent order. To an extent, that is what the parties did in the Consent Order. The problem for ADC is that it did not secure the agreement of Autotech to refrain from making a competitive pitch to prospective customers about the relative merits of ADC's "obsolete inventory" and Autotech's hot new product line. To say that it would be economically imprudent to buy an outdated product from ADC when a better product with better support was available from Autotech is not prohibited by the Consent Order.
ADC's argument that there has been a violation of the Order consists of the unsupported assertion that the statements on the website are "tantamount to representing that ADC is not authorized to sell EZTouch operator interface panels." ( Brief in Support of ADC's Motion, at 9). Why this is so, ADC does not explain, and the contention is anything but self-evident. Hence, quite apart from the fact that the conclusion is erroneous, it is appropriate to invoke the doctrine that unsupported and unamplified arguments do not warrant consideration. See Beamon v. Marshall Ilsley Trust Co., 411 F.3d 854, 862 (7th Cir. 2005); Huck Store Fixture Co. v. N.L.R.B., 327 F.3d 528, 537 (7th Cir. 2003). Indeed, ipse dixits do not meet the requirement that a violation of the Consent Order must be demonstrated by clear and convincing evidence. Kinder v. Bowersox, 272 F.3d 532, 542 (8th Cir. 2001); Resolution Trust Corp. v. Gold, 30 F.3d 251, 253 (1st Cir. 1994); International Broth. of Teamsters v. Local Union No. 810, 19 F.3d 786, 794 (2nd Cir. 1994); Rohm and Haas Co. v. Mobil Oil Corp., 718 F.Supp. 274, 315 (D.Del. 1989); Local Unions 20 v. United Brotherhood of Carpenters and Joiners of America, No. 97-5538, 1997 WL 802895, *4 (S.D.N.Y. Dec. 31, 1997). Nor do circular arguments. United States v. Thomas, No. CRIM. CCB-03-0150, 2006 WL 140558, *24 (D.Md. Jan. 13, 2006).
The Consent Order is divided into numbered paragraphs. Paragraph 1-4 track the four distinct topical concerns set forth in ADC's TRO motion in Georgia. According to ADC, the purpose of paragraph 1 was to "prohibit misleading advertising regarding ADC's status as a distributor of EZTouch products." ( Brief in Support of ADC's Motion for Contempt, at 3). Assuming for the sake of analysis that that was its purpose, does not lead to the conclusion that Autotech is a contemnor. The medicament for the perceived ill was to prohibit, not "misleading advertising" in the abstract, but statements that ADC was not authorized to or would not be selling EZTouch products. It is in this sense and only in this sense that misleading advertising about ADC's sales of EZTouch products is prohibited.
Paragraph 5 required the filing with the court in Georgia of pre-December 23rd advertisements that Autotech conceded were violative of the Consent Order as entered. A comparison of that advertising with the statements on the website now claimed to have been in violation of the Consent Order might have been instructive in deciding the motion for contempt. ADC, however, has not provided that information.
The website does not contain misleading advertising in this sense: it does not state or convey the impression that ADC is not authorized to and will not be selling "EZTouch products." It merely states that the EZTouch product ADC will be selling has been eclipsed by Autotech's new version — a product that significantly Autotech does not claim it was entitled to sell in any event. If ADC wanted a prohibition in the Consent Order against disclosure of the availability of new EZTouch products or that they were available exclusively from Autotech, it chose the wrong language.
While the Seventh Circuit has made clear that the "four corners" rule of United States v. Armour is not an inflexible bar to an assessment of the context in which the decree was entered, it has stressed that since consent decrees are a form of contract, they are governed by the basic principle that where the language is unambiguous resort to extrinsic aids are unnecessary. That language is normally the best evidence of the mutual intent of the parties at the time the contract was made and thus ought not be disregarded, Rumple of Indiana, Inc. v. Cummins Engine Co., Inc., 107 F.3d 1235, 1243 (7th Cir. 1997); Goluba, 45 F.3d at 1038, unless the court is convinced that the parties meant something different from what they said. See Ahern v. Board of Education of the City of Chicago, 133 F.3d 975, 981 (7th Cir. 1998); Alliance to End Repression v. City of Chicago 119 F.3d 472, 474-5 (7th Cir. 1997); Sealy Mattress Co. of Michigan, Inc. v. Sealy, Inc., 789 F.2d 582 (7th Cir. 1986).
It cannot be too often repeated or too strongly emphasized that "the overriding purpose in construing a [consent order] is to give effect to the mutual intent of the parties," not the unrealized aspirations of one of the parties. White, 689 F.2d at 120. Here, there is no doubt that the interests of the parties were conflicting. ADC objected quite vehemently to Autotech's apparently advertising that ADC would no longer be distributing "EZTouch operator interface panels" at all as of January 1, 2006. After all, ADC had an inventory of EZTouch products that it had the right to sell until it was exhausted — so long as it could attract customers. The parties chose not to litigate the validity of ADC's claim that Autotech was advertising that ADC was no longer an authorized seller, and/or that it was not selling EZTouch products. Instead, they agreed on language that would eliminate the objectionable message being disseminated on Autotech's website, while not prohibiting Autotech's own competitive message and informing the reader that there was a dispute between the parties.
In its opening brief, ADC ignores that portion of paragraph 1 of the Consent Order that expressly allows Autotech to advise customers of its supply contract dispute with ADC. ( Brief in Support of ADC's Motion for Contempt, at 3, 9). Indeed, its quotation of paragraph 1 omits that entire portion and does not even indicate the omission by ellipsis. ( Brief in Support of ADC's Motion for Contempt, at 3). See McCandless v. Great Atlantic and Pac. Tea Co., Inc., 697 F.2d 198, 202 (7th Cir. 1983); Loeffel Steel Products, Inc. v. Delta Brands, Inc., 387 F.Supp.2d 794, 823 (N.D.Ill. 2005).
Autotech and ADC are commercially sophisticated parties that had the advice of sophisticated counsel when they negotiated the Consent Order. They knew how to say what they meant, and they had every incentive to draft the Consent Order so that the agreed restrictions would be spelled out with sufficient clarity that they would know what was prohibited and what was permitted. Obviously, each side could not have all of what it wanted. Paragraph 1 represents a compromise between polar positions. A commercially sophisticated party like ADC should not be relieved from the consequences of having failed to insist on language that spelled out with specificity the obligations it wanted imposed on the other party — especially where those obligations were the very core of the transaction. Compare ConFold Pacific, Inc. v. Polaris Ind., Inc., 433 F.3d 952, 955 (7th Cir. 2006) (Posner, J.).
If, with the benefit of the illumination hindsight always provides, ADC neglected to insist upon language in the Consent Order that would clearly prohibit the conduct about which it now complains, it must look for succor elsewhere. Courts will no more rewrite a consent decree than they will any other contract. When dealing with consent orders — reflecting as they inevitably do a compromise between competing and discordant aspirations — the language the parties agreed on should be enforced as written. Rumple of Indiana, 107 F.3d at 1243; Goluba, 45 F.3d at 1038. ADC has pointed to nothing that counsels disregarding the text of the Consent Order and perhaps more importantly, it has not paused to explain how disregarding that text in favor of some extrinsic aid to construction — what that something might be ADC never says — would support of a finding of contempt not otherwise warranted by the Consent Order itself.
Significantly, when ADC finds it advantageous to rely on the text of the Consent Order, it does not hesitate to read it literally. For example, paragraph 5 of the Order provides for a disclosure to the court of "advertising in print media" that antedated the Order and that might be in violation of it. ADC insists that advertising on electronic media is outside this provision. ( Brief in Support of Motion, at 6, 10).
This is not in the slightest to diminish the importance of obedience to court orders, which must be obeyed, even if erroneous, until they are modified or rescinded by a court. See also, United States v. United Mine Workers of America, 330 U.S. 258, 290 n. 56 (1947); McCann v. New York Stock Exchange, 80 F.2d 211, 214 (2d Cir. 1935) (L. Hand, J.); United States v. Cutler, 840 F. Supp. 959, 966 (E.D.N.Y. 1994); Grove Fresh Distributors, Inc. v. John Labatt Limited, 888 F. Supp. 1427 1444, n. 24. (N.D.Ill. 1995). It is merely to recognize that parties are not required to refrain from doing something that is not prohibited by a consent order with sufficient clarity, before the party can be found to have violated the order, and that there must be clear and convincing evidence that what was done was indeed prohibited by the order. Compare United States v. Cardiff, 344 U.S. 174, 177 (1952) (words which are vague and fluid may be as much of a trap for the innocent a the ancient laws of Caligula).
Judge Easterbrook's analysis in In the matter of Krynicki, 983 F.2d 74, 75 (7th Cir. 1992) is instructive. There, a magistrate judge entered an order which permitted "anyone to designate any discovery materials as confidential, for any or no reason." Judge Easterbrook described the order as "extraordinary." Id. at 77. Judge Easterbrook noted that the plaintiff "has a problem of her own making. Having designated every syllable of every deposition as confidential, she cannot reveal the information to the public without violating an order of the district court." What to do? Stressing that even this "confidentiality order is effective until modified" and that litigants must "obey invalid orders while they are outstanding," Judge Easterbrook ordered the clerk of the Seventh Circuit to return to the plaintiff all copies of her brief and appendix, which contained materials violative of the "extraordinary" protective order. He gave the plaintiff thirty days to file a new brief, which "must comply with the protective order, which means either removing the transgressing references or obtaining a modification of the order." Id. at 77-78.
In sum, ADC has not demonstrated that it is "highly probable," that Autotech has violated paragraph 1 of the Consent Order. Colorado, 467 U.S. at 316.
2. The "misleading information concerning the status of [the Illinois Lawsuit]" Provision
Paragraph 2 of the Consent Order prohibits representations "that contain false or misleading information concerning the status" of the Illinois litigation. According to Mr. Marchuk of ADC's business development team:
ADC discovered a "sponsored link" on the home page of Control Engineering's website, located at URL www.manufacturing.net/ctl/index.asp. The sponsored link connected users to an October 18, 2005 press release concerning the consent TRO that was entered into on October 11, 2005 in the parties' Illinois case. This press release gave the impression that the Court had found ADC and its co-defendants liable and had issued a substantive ruling in the case, when in fact ADC and its co-defendants willingly entered into a consent agreement. . . . ADC complained to Control Engineering about this sponsored link, and Control Engineering promptly removed it.
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( Brief in Support of Motion for Contempt, Marchuk Decl. at ¶ 10). ADC has attached as exhibits a three-page printout of the Control Engineering web page, and a printout of Autotech's October 18, 2005 press release. (Marchuk Decl., Ex. 7). The Control Engineering home page attached to the declaration bears the date of 1/20/06. Since it is claimed that this page led to the October 2005 press release, it is reasonable to infer that the press release was also downloaded on this date, although the declaration does not say, and the press release has no date of downloading, no URL address, and no intrinsic identification of its source.
The offensive portion of the press release, although not specifically identified by ADC, is presumably:
On October 11th, 2005, Federal District Court Justice [sic], the Honorable James F. Holderman, entered a Court Order stopping [ADC] . . . from soliciting or accepting any orders for the C-More line of products and also further restricted them from advertising any pricing information on the new Panels. (Marchuk Decl., Ex. 7, Press Release, at 1).
Apart from not containing an Autotech sponsored link, the three-page Control Engineering printout does not appear to contain any link that, at least on its face, would lead to the October 2005 press release or to Autotech's website, although there is a link to material from ADC on the second page. Mr. Marchuk does not identify the "sponsored link." Nor does he indicate whether the press release was revealed on this unidentified web site or whether it led to a third site. He says that the sponsored link "connected users" to the press release which is suggestive that there was a third (unidentified) URL link. There is nothing to suggest that Autotech placed the press release on the "sponsored link" on the home page of Control Engineering's website or that it placed it on a website that the sponsored link "connected" visitors to — either prior to or after the December 27th Consent Order.
According to Autotech's chief executive officer, Shalabh Kumar, Autotech was unaware of the link on Control Engineering's website. It did not influence in any way the links that Control Engineering puts on its website. ( Autotech's Brief in Response, Ex. A, Declaration of Shalabh Kumar, ¶¶ 13-16). While Autotech did maintain a link to the press release on its own website, it is undisputed that the link was removed after the Consent Order was entered.
ADC claims in its reply brief that this is a "dubious assertion" but does not explain why. ( Reply Brief in Support, at 3). Absent evidence sufficient to call these denials into question, they should be accepted. Goluba, 45 F.3d at 1039. Exhibit 6, in addition to containing the Marchuk declaration, also consists of the opinion of the Illinois Appellate Court in Kumar v. Borstein. The inclusion of the opinion is apparently to show that one of the defendants is no stranger to disobedience to court orders and — although the brief does not say it in words — that it is more likely than not that there has been a contempt in this case. Of course, Rule 404(b), Federal Rules of Evidence, prohibits the use of other acts to show propensity, and even if it did not, it is impossible to conclude on this record whether Mr. Kumar was the guiding force in the conduct in this case about which ADC complains thereby making the propensity evidence even logically relevant.
Realizing the inadequacy of its proof in the opening brief, ADC's reply brief"[s]witch[ed] positions as nimbly as if dancing a quadrille." Orloff v. Willoughby, 345 U.S. 83, 87 (1953) and abandoned reliance on the Control Engineering website and the Marchuk's declaration. Now the argument was bottomed on the declaration of its counsel, James Trigg, who has been ADC's lawyer since the beginning of the case in Georgia. According to Mr. Trigg, he was able to access the press release on March 9, 2006, by entering the extended URL address: www.ezautomation.net/downloads/Press_release_101805.pdf. ( Reply Brief in Support, at 2-3; Ex.1, Trigg Declaration ¶ 2). A printout of the page and press release is attached to his declaration. Mr. Trigg claims he was also able to access the press release through various website searches conducted through Google. None of the URL addressees that he discovered through his efforts are either Autotech sponsored links or linked to the Autotech website, and there is absolutely no proof that Autotech caused the release to be accessible through the addresses Mr. Trigg found.
This is the second time in as many briefings that ADC has saved its best for last by making arguments in the reply brief that should and could have been made in its opening brief. A repetition of this tactic will not be tolerated.
Nor did Mr. Trigg include in his presentation a printout of the ezautomation website page from March 9, with the link to the press release page, which would have indicated that Autotech itself was maintaining a link to the offending press release, and thereby misrepresenting the nature of the Illinois lawsuit in the wake of the Consent Order. Absent that — or a claim by Mr. Trigg that there was such an offending link, and no such claim is made — it cannot be concluded that the press release was accessible from Autotech's website. Rather, the inference to be drawn is that the site was merely an unconnected page — not linked to the website on March 9 — which Mr. Trigg was able to access as a result of his prior familiarity with the specific address for the press release. ADC's submissions raise more questions than they answer.
There is presently no link to the press release on the ezautomation website. The press release page is no longer accessible through the address Mr. Trigg employed, and internet searches do not lead to it. In fact, they lead to more accurate information, such as an article from Control Design dealing with the parties' dispute:
AVG stated on Oct. 18 that U.S. District Judge James Holderman's order "stopped" AutomationDirect, its president and CEO, Tim Hohmann and Koyo from soliciting or accepting any orders for C-more products, and "restricted them" from advertising any pricing information. However, the order itself says, "The parties agree and stipulate that . . . the defendants shall neither solicit nor accept any purchase order for the C-more line of products, or discuss, advertise, or disclose the pricing of said products with existing or potential customers from and after the entry of this order." The order adds that it doesn't affect C-more information already in circulation, that AutomationDirect can talk about C-more with its distributors, and that the order will terminate when a subsequent order is issued.
http://www.controlglobal.com/industrynews/2005/187.html). This article was also retrieved in Mr. Trigg's search. (Trigg Decl., Exs. 2, 3).
It is for ADC to demonstrate by clear and convincing evidence that Autotech, after December 27, 2005, misrepresented the "status" of the Illinois lawsuit in some advertising. Dowell, 257 F.3d at 699. It is anything but "highly probable" that it did so. Colorado, 467 U.S. at 316. ADC's opening brief submitted no reliable evidence — let alone clear and convincing evidence — that Autotech maintained a link to the offending press release on its website after the Consent Order was entered or that it was aware that the release was available on a specific URL address on which it had once appeared, even after it had been removed from the Control Engineering website. It submitted no evidence that Autotech sponsored a link to the press release on any other website. Indeed, it failed to expound on its theory in any meaningful way, devoting just three scant sentences to the issue.
The entirety of ADC's rather breezy argument regarding the prohibitions of paragraph two can be very economically reproduced verbatim:
In addition to the foregoing infractions, ADC learned on January 19, 2006 that Autotech maintained active advertising on websites on which Autotech continued to post misleading information about the status of the lawsuit in this Court. While paragraph 5 of the Consent Order maintained an exemption for print advertising placed prior to December 23, 2005, no such exemption existed for electronic advertising. . . . Finally, the Autotech Parties did not even bother to mask their willful disobedience of the third prohibition, instead opting to continue posting old press releases that mischaracterized proceedings in this Court.
( Brief in Support of Motion, at 6, 10(emphasis in original)).
Instead, ADC opted to attach printouts of other entities' websites to its submissions without explaining their significance in its brief. ( Brief in Support of ADC's Motion, at 6, 10). It is not the court's responsibility to develop these arguments on ADC's behalf or root through the record for support for its claims. Corley v. Rosewood Care Center, Inc. of Peoria, 388 F.3d 990, 1001 (7th Cir. 2004); United States v. Lanzotti, 199 F.3d 954, 960 (7th Cir. 1999); Autotech Technologies, Ltd. Partnership v. AutomationDirect.com, Inc., 2006 WL 1046957 at *1 (N.D.Ill. 2006).
The reply brief was no more persuasive. Even if its arguments were not deemed to be waived because they came too late, Autotech Technologies, Ltd. Partnership, 2006 WL 1046957 at *1, the reply brief does not provide clear and convincing evidence that after the December 27th Consent Order, Autotech misrepresented the status of the Illinois suit. It proves nothing more than that Mr. Trigg: 1) was aware of the extended website address on which the October 18, 2005 press release had in the past appeared; and 2) through a series of Google searches had found a website (or sites), not controlled by or affiliated with Autotech, that on March 9, 2006 contained either the October press release or a link to another independent site on which it appeared or referred to it.
The fact that Mr. Trigg was able to unearth what is for all practical purposes a cyberspace artifact does not prove that after the December 27th Consent Order Autotech repeated the contents of the October 2005 press release to any third party. Indeed, it is undisputed that after the Consent Order the link on the Autotech website to the press release was deleted as was the link on the Control Design website. Beyond saying that his Google searches took him to an (unidentified) link that took him to the press release, Mr. Trigg explains nothing that would constitute clear and convincing evidence of contumacy by Autotech. Whatever the unidentified link to which he has reference, there is nothing to suggest that it was known to or has anything to do with Autotech. When we tried more than a month ago to replicate Mr. Trigg's efforts, we were unable to do so. The specific URL address on which the site at one time appeared, is no longer in existence.
In sum, ADC has fallen short of establishing by clear and convincing evidence that Autotech violated paragraph 2 of the Consent Order.
3. The Provision Prohibiting the "making a representation to any third party . . . that [the Autotech parties] are the owners of the "EZTouch" trademark" We come then to the argument that Autotech violated paragraph 4 of the Consent Order by having on its website the statement that: " Except for EZTouch and EZText, all product names, trademarks and registered trademarks are the property of their respected [sic] manufacturers." (Emphasis supplied). According to ADC's somewhat Byzantine train of reasoning, the statement really means that Autotech is claiming ownership of the marks. ( Brief in Support of ADC's Motion, at 6) (brackets in original). "The elaborate argument . . . does not need an elaborate answer." United States v. Wurzbach, 280 U.S. 396, 399 (1930).Paragraph 4 expressly allows the "usage of the [EZTouch trademark] in advertising or otherwise" by Autotech. It prohibits Autotech from making a "specific claim" that they own the mark. On various pages of the website, which ADC has included in its submission, Autotech proudly boasts that it is the manufacturer and designer of the EZTouch and EZText products. However, it simultaneously states that all of the trademarks and registered trademarks, except for EZTouch and EZText, are owned by their manufacturers. The ineluctable and the only common sense conclusion to be drawn is that Autotech is disclaiming ownership of those marks. ADC's opposite conclusion is based on "a construction [of language] that is not interpretation, but perversion." United States v. Pulaski Co., 243 U.S. 97, 106 (1916) (Holmes, J.).
The disavowal of ownership of the trademark also requires rejection of the argument that Autotech's isolated usage of the "tm" symbol in connection with its promotion of free software upgrades for users of EZTouch PLC touch panels is violative of paragraph 4 of the Consent Order. ( Id., Marchuk Decl., Ex. 6). Paragraph 4, in plain unambiguous terms, explicitly allows the Autotech parties' usage of the mark "EZTouch" in their advertising. All that is prohibited is a "specific claim of ownership" of the mark. (Emphasis supplied). To the uninitiated, the use of the "tm" symbol would indicate nothing beyond the fact that EZTouch was a trademark, not that it was owned by Autotech. Even standing alone, it certainly would not satisfy the requirement that ADC prove by clear and convincing evidence that its isolated usage constituted a "specific claim" of ownership. Moreover, in the context of Autotech's express disavowal of the ownership of the mark and its use of the "tm" symbol in connection with the reference to ADC's C-More product — a mark the website noted was ADC's — it cannot be said that the evidence is clear and convincing that there has been a violation of paragraph 4 of the Consent Order. ( See Marchuk Decl., Ex 2 at unnumbered page 3; Ex 5 at unnumbered pages 4, 7).
CONCLUSION
A careful analysis of the acts about which ADC complains, when measured against the Consent Order's rather clear prohibitions, does not leave an abiding conviction that Autotech's contentions are "highly probable." Nor does the evidence adduced by Autotech "instantly tilt the evidentiary scales in the affirmative when weighed against the evidence . . . offered in opposition." Colorado, 467 U.S. at 316. Thus, it is recommended that ADC's motion for contempt [124] and [125] be DENIED.Any objections to the Report and Recommendation must be filed with the Clerk of the Court within ten (10) days of receipt of this notice. Failure to file objections within the specified time waives the right to appeal the Magistrate Judge's Report and Recommendation. See Fed.R.Civ.P. 72(b); 28 U.S.C. 636(b)(1)(C); Lorentzen v. Anderson Pest Control, 64 F.3d 327, 329 (7th Cir. 1995).