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National Board for Certification in Occupational Therapy, Inc. v. Shane

United States District Court, D. Maryland, Southern Division

July 6, 2017

NATIONAL BOARD FOR CERTIFICATION IN OCCUPATIONAL THERAPY, INC., Plaintiff,
v.
JEFFREY M. SHANE, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Paul W. Grimm United States District Judge

         Plaintiff National Board for Certification in Occupational Therapy, Inc. (“NBCOT”) filed suit against Defendants Jeffrey M. Shane d/b/a Pass the NBCOT LLC d/b/a Pass the OT and Stephanie Shane d/b/a Pass the NBCOT LLC d/b/a Pass the OT (together, “the Shanes”), alleging trademark infringements, counterfeiting, copyright infringement, unfair competition, and other violations of the Lanham Act, federal copyright law, and common law, based on the Shanes' use of NBCOT's name and test questions in the Shanes' tutorial program (formerly called Pass the NBCOT, now called Pass the OT) and related website. The parties entered into a settlement agreement and filed a Joint Motion for Entry of Stipulated Consent Judgment, ECF No. 17, which the Court approved, entering a Final Judgment on Consent (“Consent Decree”), ECF No. 18. The Consent Decree permanently enjoined the Shanes from, inter alia, “[u]sing, copying, displaying, distributing, publicly performing, making derivative works from or otherwise infringing NBCOT's Copyrighted Work, except as either permitted under the doctrine of fair use or with NBCOT's consent.” Consent Decree ¶ 4(c). It also provided:

To the extent Defendants have not already done so, Defendants are directed to destroy all infringing test materials, advertisements, labels, signs, prints, packages, wrappers, receptacles and all other materials in their possession or under their control that contained unauthorized uses of the name or mark NBCOT, either alone or in combination with other words, phrases or designs, and any confusingly similar name or more or any other reproduction, counterfeit, copy or colorable imitation of Plaintiff's certification marks and trade names and all plates, molds, matrices, and other means of making or duplicating the same.

Id. ¶ 6.

         Pursuant to the settlement agreement, if NBCOT saw any future violations, it would let the Shanes know and give them ten days to cure before coming to the Court for resolution. Defs.' Resp. 8-9; Pl.'s Mem. 1, 4 n.1, ECF No. 19-1. Specifically the settlement agreement provided:

In the event NBCOT discovers activity in the future by the Shanes and/or PTOT that NBCOT deems an infringement of their trademarks or copyrights, NBCOT shall provide written notice to the Shanes and PTOT specifically identifying the infringement with sufficient detail to allow the Shanes or PTOT to cure and allow them ten (10) business days to cure the infringement prior to taking any action against any or all of them. For the avoidance of any doubt, if the Shanes and/or PTOT cure the alleged infringement within ten (10) business days, NBCOT will refrain from asserting any claim against the Shanes and/or PTOT for damages or otherwise.

Defs.' Resp. 8-9. The parties have referred to this as the “safe harbor” notice provision.

         At the end of April, NBCOT filed a motion, ECF No. 19, for an order to show cause why the Shanes should not be held in contempt for violating the parties' settlement agreement and the Court's Consent Decree “including by copying and using a large number of NBCOT's copyrighted test questions in Defendants' own Pass the OT test preparation materials.” Pl.'s Mem. 1. NBCOT asks the Court to “hold Defendants in civil contempt and award NBCOT its reasonable costs and attorneys' fees in connection with this motion.” Id. at 2. I issued a show cause order, ECF No. 22, directing the Shanes to file a written response (which they did, ECF No. 23) and NBCOT to file a reply (which it did, ECF No. 24). The issue is now ripe for resolution, and a hearing is not necessary. See Loc. R. 105.6. Because NBCOT has not established contempt by clear and convincing evidence, I will deny the motion.

         Contempt Sanctions

         The Court has the authority to sanction an individual for failing to follow the Court's order or decree. 18 U.S.C. § 401(3). Moreover, “[t]he case law is well established that district courts have the inherent power to sanction parties for certain bad faith conduct, even where there is no particular procedural rule that affirmatively invests the court with the power to sanction.” Strag v. Bd. of Trs., Craven Cmty. Coll., 55 F.3d 943, 955 (4th Cir. 1995). Indeed, for almost two centuries, it has been established that “[c]ertain implied powers must necessarily result to our Courts of justice from the nature of their institution . . . . because they are necessary to the exercise of all others” and they enable courts “to preserve [their] own existence and promote the end and object of [their] creation.” United States v. Hudson, 11 U.S. (7 Cranch) 32, 33-34 (1812); see Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (quoting Hudson, 11 U.S. (7 Cranch) at 34); Roadway Exp., Inc. v. Piper, 447 U.S. 752, 764 (1980) (same), superseded on other grounds by statute as stated in Morris v. Adams-Millis Corp., 758 F.2d 1352, 1357 n.7 (10th Cir. 1985). “This power is organic, without need of a statute or rule for its definition, and it is necessary to the exercise of all other powers.” United States v. Shaffer Equip. Co., 11 F.3d 450, 462 (4th Cir. 1993). Undergirding this authority “is the need to preserve the integrity of the judicial process in order to retain confidence that the process works to uncover the truth.” Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., 685 F.Supp.2d 456, 465 (S.D.N.Y. 2010). Thus, “[d]ue to the very nature of the court as an institution, it must and does have an inherent power to impose order, respect, decorum, silence, and compliance with lawful mandates.” Shaffer Equip. Co., 11 F.3d at 461; see also Chambers, 501 U.S. at 43 (holding that trial courts are “vested, by their very creation, with power to impose silence, respect, and decorum, in their presence, and submission to their lawful mandates”); Strag, 55 F.3d at 955 (quoting Chambers, 501 U.S. at 43).

         Therefore, the court has the “inherent power to control the judicial process and litigation, a power that is necessary to redress conduct which abuses the judicial process.” Goodman v. Praxair Servs., Inc., 632 F.Supp.2d 494, 505 (D. Md. 2009) (quoting United Med. Supply Co. v. United States, 77 Fed.Cl. 257, 263-64 (2007) (quoting Chambers, 501 U.S. at 45-46)) (internal quotation marks omitted); see also Adkins v. Wolever, 554 F.3d 650, 652 (6th Cir. 2009); Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006); Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005); Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001); Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 517-18 (D. Md. 2010); In re NTL, Inc. Secs. Litig., 244 F.R.D. 179, 191 (S.D.N.Y. 2007); Thompson v. U.S. Dep't of Hous. & Urban Dev., 219 F.R.D. 93, 100 (D. Md. 2003). The court's inherent authority to sanction arises when a party “abuses the process at a level that is utterly inconsistent with the orderly administration of justice or undermines the integrity of the process.” Shaffer Equip. Co., 11 F.3d at 462. Pursuant to their inherent authority, courts “may issue orders, punish for contempt, vacate judgments obtained by fraud, conduct investigations as necessary to exercise the power, bar persons from the courtroom, assess attorney's fees, and dismiss actions.” Id. at 461-62. They may enforce “the observance of order, ” such as by imposing fines or prison sentences for contempt. Hudson, 11 U.S. (7 Cranch) at 34.

         Contempt sanctions may be civil or criminal. Buffington v. Balt. Cnty., 913 F.2d 113, 133-34 (4th Cir. 1990). It is civil contempt “[w]hen the nature of the relief and the purpose for which the contempt sanction is imposed is remedial and intended to coerce the contemnor into compliance with court orders, ” rather than to “vindicate the authority of the court.” Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 537 (D. Md. 2010). A fine is remedial when paid to the opposing party, rather than to the court, although a fine “payable to the court is also remedial when the defendant can avoid paying the fine simply by performing the affirmative act required by the court's order.” Id. (quoting Buffington, 913 F.2d at 133-34).

To establish civil contempt, each of the following elements must be shown by clear and convincing evidence:
(1) the existence of a valid decree of which the alleged contemnor had actual or constructive knowledge; (2) ... that the decree was in the movant's “favor”; (3) ... that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) ...

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