Cernelle v. Graminex, L.L.C.

539 F.Supp.3d 728

A.B. CERNELLE, Plaintiff,

v.GRAMINEX, L.L.C., and Cynthia May, Defendants.

Case Number 03-10291

United States District Court, E.D. Michigan, Southern Division.

Signed May 12, 2021

Allyn D. Kantor, Miller, Canfield, Ann Arbor, MI, Robert W. Hayes, Susan Ciallella, Calli Jo Padilla, Rachel Collins Clarke, Aaron Krauss, Cozen O'Connor, Philadelphia, PA, Brandon M. Pellegrino, Matthew G. Berard, Bowman and Brooke LLP, Bloomfield Hills, MI, for Plaintiff.

John A. Decker, Braun, Kendrick, Saginaw, MI, Daniel D. Quick, Dickinson Wright, Troy, MI, David Lee Petitjean, W. Drescher & Associates, Co., L.P.A., Sylvania, OH, Jessica Vartanian Currie, United States Attorney's Office, Detroit, MI, Melissa A. Alcantara, Dickinson Wright PLLC, Washington, DC, for Defendant L. L. C. Graminex.

John A. Decker, Braun, Kendrick, Saginaw, MI, Daniel D. Quick, Dickinson Wright, Troy, MI, David Lee Petitjean, Groth & Associates, Toledo, OH, Jessica Vartanian Currie, United States Attorney's Office, Detroit, MI, Melissa A. Alcantara, Dickinson Wright PLLC, Washington, DC, for Defendant Cynthia May.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO ALTER OR AMEND JUDGMENT, GRANTING IN PART PLAINTIFF'S MOTION FOR ATTORNEY'S FEES AND EXPENSES, AND GRANTING MOTION TO DEEM ATTORNEY FEE MOTION A FINAL ORDER

DAVID M. LAWSON, United States District Judge

In this dispute over the ownership and right to use certain trademarks of plaintiff A.B. Cernelle, the plaintiff moved to enforce a settlement agreement, which included a permanent injunction, against defendants Graminex, L.L.C., and its chief operator Cynthia May. After a hearing that included the testimony of eight witnesses and consideration of 102 exhibits, the Court found that the defendants had violated the settlement agreement and the injunction and found them in civil contempt. As a remedy, the Court ordered disgorgement of profits, commanded that certain content be removed from Graminex's website, entered a remedial injunction, and ordered attorney's fees to be paid to the plaintiff.

The defendants filed a timely motion to reconsider or alter two aspects of the remedial part of the judgment. They contend that the Court should not have imposed the remedy of disgorgement on Cynthia May but instead should have limited that obligation to Graminex, only. They also assert that the remedial injunction, which enjoins the defendants from selling or transferring product to a customer that the defendants "know or should know uses in any way the trademarks listed in the permanent injunction," is vague and impermissibly expands the scope of the permanent injunction that was part of the settlement agreement. The Court finds no merit in their first argument, but the remedial injunction warrants a slight modification. Therefore, the Court will grant the motion to alter the judgment in part.

Cernelle also filed a timely motion under Rule 54(d) for attorney's fees and expenses. With some adjustments, the Court will order payment of those fees and expenses for the reasons discussed below and in the earlier opinion. The defendants also filed a motion under Rule 58(e) to allow adjudication of that fee motion to mark the time for the appeal period to run under Federal Rule of Appellate Procedure 4(a)(4). The Court will grant that motion.

I. Background

The original settlement agreement in this case was confirmed by an order that included a permanent injunction. The injunction stated that "defendants Graminex, L.L.C. and Cynthia May, and each of them, their agents, servants, and employees, and all persons in active concert with them, are RESTRAINED AND ENJOINED from pledging or alienating the trademarks in dispute ..." ECF 85, PageID.2036. That injunction "is intended to prevent the negotiation and execution of contracts, agreements, options to purchase, deeds, memoranda of agreements, assignments, licenses, and plans that employ or relate in any manner to the registered trademarks and trademark applications, except as required by the parties’ settlement of this litigation." Ibid.

On August 24, 2018, plaintiff A.B. Cernelle filed a motion to enforce the settlement agreement and hold Graminex, L.L.C., in contempt for violating certain terms of the permanent injunction. Cernelle alleged that Graminex breached the settlement agreement and violated the injunction by (1) forging partnerships with foreign entities (which included conspiring with Russians) that involved supplying the defendants’ pollen product under the CERNILTON brand; (2) hosting a foreign entity's website that promoted flower pollen extract treatment for prostate cancer branded as "Cernilton"; and (3) citing clinical studies on the defendants’ website, which report on the efficacy of the plaintiff's CERNILTON and CERNITIN products, in support of the defendants’ own products.

After the evidentiary hearing, the Court granted Cernelle's motion and denied the defendants’ motion to modify the injunction. Although the plaintiff's motion was directed at defendant Graminex, only, the Court ordered the disgorgement of profits in the amount of $535,854 against both Graminex and May, finding that the "defendants continuously, systematically, and intentionally violated the relevant terms of the settlement agreement." ECF No. 219, PageID.9304. The Court also found that, "although plain on its face," the defendants’ response suggested that the permanent injunction "require[d] clarification." Id. at PageID.9322. The Court then ordered that

defendants Cynthia May Graminex, L.L.C., their agents, servants, attorneys, employees, and all those in active and participation with them who receive actual notice of this order, are RESTRAINED AND ENJOINED from (A) selling any product that identified in any manner using any of the trademarks listed in the permanent injunction entered in this case (ECF No. 85), including CERNILTON and CERNITIN; and (B) selling, transferring or conveying in any manner any product to a customer that the enjoined parties know or should know uses in any way any of the trademarks listed in the permanent injunction entered in this case (ECF No. 85), including CERNILTON and CERNITIN.

Id. at PageID.9327 (emphasis added). The Court entered a corresponding judgment.

II. Motion for Reconsideration or to Amend the Judgment

The defendants filed a motion for reconsideration under our local rule or alternatively for relief under Federal Rules of Civil Procedure 60(b) or 59(e). To succeed on a motion for reconsideration under E.D. Mich. LR 7.1(h)(1), the defendants must identify (1) a "palpable defect," (2) that misled the Court and the parties, and (3) that correcting the defect will result in a different disposition of the case. E.D. Mich. LR 7.1(h)(3). A "palpable defect" is a defect which "is obvious, clear, unmistakable, manifest, or plain." Chrysler Realty Co., LLC v. Design Forum Architects, Inc. , 544 F. Supp. 2d 609, 618 (E.D. Mich. 2008).

Under Federal Rule of Civil Procedure 60(b)(1), the Court may relieve a party of its order based on "mistake, inadvertence, surprise, or excusable neglect." That rule "is intended to provide relief in only two situations: (1) when a party has made an excusable mistake or an attorney has acted without authority, or (2) when the judge has made a substantive mistake of law or fact in the final judgment or order." United States v. Reyes , 307 F.3d 451, 455 (6th Cir. 2002). Alternatively, the Court may amend an order under the catch-all provision of Rule 60(b)(6) "for any other reason that justifies relief." However, such post-judgment relief under Rule 60 is appropriate only in "unusual and extreme situations where principles of equity mandate relief." Export–Import Bank of U.S. v. Advanced Polymer Scis., Inc. , 604 F.3d 242, 247 (6th Cir. 2010). The Court may "alter or amend a judgment" under Rule 59(e) "if there is: (1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice." Intera Corp. v. Henderson , 428 F.3d 605, 620 (6th Cir. 2005).

A. Cynthia May's Personal Liability

The defendants argue that the disgorgement remedy should extend only to Graminex and not to May because the Court measured the amount of disgorgement by Graminex's profit on the sales that violated the permanent injunction. They say that May did not profit personally from the misconduct. Moreover, they say that Cernelle never asked for this relief against May herself. Cernelle responds that they did not include May as a target of their disgorgement demand because Graminex misled Cernelle about her ongoing involvement with Graminex.

The Court committed no palpable error by including May in the disgorgement order. As the Court stated in its contempt order, " ‘[d]isgorgement is an equitable remedy to force a defendant to give up the amount equal to the defendant's unjust enrichment.’ " Contempt Order ECF No. 219, PageID.9324 (quoting Gavriles v. Verizon Wireless , 194 F. Supp. 2d 674, 681 (E.D. Mich. 2002)) ; see also ePlus Inc. v. Lawson Software, Inc. , 946 F. Supp. 2d 449, 455-59 (E.D. Va. 2013) (holding that disgorgement of revenues is permitted if the competitor were found in civil contempt for violating permanent injunction relating to patents). It is accurate to say that Cernelle did not train its sights on May individually when it argued for disgorgement. Cernelle explains, however, that it did not name May in its contempt motion because the defendants "represented in response to Cernelle's pre-motion demand letters that she was no longer a member of Graminex." See Pre-Motion Demand Letter, ECF No. 89-5, PageID.2142. Graminex's statement was misleading; May was still the CEO of Graminex in 2018. May Decl., ECF No. 99-7, PageID.2356.

May contends that she led the company through 2011, but the evidence presented at the contempt motion hearings established that May was the architect of the plan to sell Graminex's product...