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