Friday, June 14, 2013

Creation of Affiliate to Avoid Injunction Warrants Lost Profits, Attorneys’ Fees and Possibly Enhanced Damages

The court granted plaintiff's motion for contempt of a consent permanent injunction against defendant and its affiliate. Plaintiff was awarded lost profits and attorneys' fees along with a potential enhancement of double lost profits because defendant created the affiliate to avoid the parties' settlement agreement and injunction. "[The affiliate] and [defendant] are under common control. . . . [Defendant's principal] is the founder, president, sole shareholder, and sole decision-maker for [both entities]. . . . [The affiliate's] sole purpose is to develop, manufacture, and offer for sale the [device at issue]. . . . [Defendant's principal] created [the affiliate] to evade the Agreement and the Consent Order. It is undisputed that [the affiliate] had notice of the Consent Order, that [defendant's principal] . . . was secretive about his plans to develop the [device at issue] even as the parties were engaging in settlement negotiations at the time he signed the Agreement. . . . "[A]n award of Plaintiff’s lost profits is appropriate to ensure Consent Order compliance and to compensate Plaintiff for losses it suffered as a result of Defendants’ contemptuous conduct. . . . The ultimate sanction amount, including whether to impose an enhanced award, depends at least in part on the sales figures for the [device at issue] for Plaintiff to use in determining the amount, if any, of Plaintiff’s lost profits. . . . Plaintiff is also awarded reasonable attorneys’ fees incurred in conjunction with seeking contempt for violation of the Court’s Consent Order."

Hubbard/Downing, Inc. v. Kevin Heath Enterprises et al, 1-10-cv-01131 (GAND May 30, 2013, Order) (Duffey, J.).

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