Hidrofiltros v. Rexair

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Hidrofiltros, et al. v. Rexair No. 02-1823 ELECTRONIC CITATION: 2004 FED App. 0001P (6th Cir.) File Name: 04a0001p.06 _________________ UNITED STATES COURT OF APPEALS COUNSEL FOR THE SIXTH CIRCUIT ARGUED: Michael M. Jacob, RAYMOND & PROKOP, _________________ Southfield, Michigan, for Appellants. Peter R. Bisio, HOGAN & HARTSON, Washington, D.C., for Appellee. ON BRIEF: Michael M. Jacob, Kevin E. Sralla, HIDROFILTROS, DE MÉXICO, X RAYMOND & PROKOP, Southfield, Michigan, Howard B. S.A. DE C.V., and JOSÉ - Rockman, BARNES & THORNBURG, Chicago, Illlinois, for SALTIEL ABOUAF, - Appellants. Peter R. Bisio, Craig A. Hoover, HOGAN & - No. 02-1823 HARTSON, Washington, D.C., Jeffrey A. Sadowski, Plaintiffs-Appellants, - > HOWARD & HOWARD, Bloomfield Hills, Michigan, for , Appellee. v. - - _________________ REXA IR, INC., - Defendant-Appellee. - OPINION - _________________ N BOYCE F. MARTIN, JR., Circuit Judge. This case Appeal from the United States District Court involves a straightforward interpretation of a settlement for the Eastern District of Michigan at Detroit. agreement that disposed of a previous trademark-related No. 01-74653—Avern Cohn, Senior District Judge. lawsuit that Rexair, Inc. filed in the district court in 1995 against José Saltiel Abouaf and his company, Hidrofiltros, de Argued: December 2, 2003 México, S.A. de C.V. Saltiel and Hidrofiltros have filed a complaint alleging that Rexair breached the settlement Decided and Filed: January 6, 2004 agreement by filing a trademark infringement lawsuit in a Portuguese court against an individual who is allegedly Before: MARTIN and MOORE, Circuit Judges; “affiliated” with Saltiel. The district court dismissed the McKEAGUE, District Judge.* complaint, holding that the settlement agreement did not prohibit Rexair from filing its Portuguese lawsuit. Because we believe there is no other reasonable interpretation of the settlement agreement, we affirm the district court’s judgment.

* The Ho norable D avid W . McKeague, United States District Judge for the Western District of Michigan, sitting by designation.

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I. BACKGROUND or on machines or accessories. Saltiel and Hidrofiltros also agree not to use, either directly or indirectly (e.g., A. The Underlying Lawsuit through Saltiel family members, agents, employees or companies owned or controlled by or affiliated with Rexair is the manufacturer of the “Rainbow” vacuum Saltiel), any product manual or packaging (including the cleaner, which it distributes in over eighty countries. Prior to box in which the Robot vacuum cleaner is marketed or the 1995 litigation, Saltiel had distributed Rexair’s products sold), that is the same or confusingly similar to those in Mexico through his company, Hidrofiltros. In 1995, used for Rexair’s Rainbow® products. The sole Rexair filed a complaint in the district court against Saltiel exception to this is that Saltiel and Hidrofiltros or their and Hidrofiltros, alleging that they manufactured – through agents or affiliates, without being deemed to be in another company owned by Saltiel, called Turmix – and sold violation of the foregoing provisions of this subparagraph a knock-off of the Rainbow called the “Robot.” Rexair’s 2.a., may use up the remaining stock of certain existing complaint asserted various contract, tort, trademark and materials in conjunction with the sale of Robot vacuum copyright claims, and Saltiel and Hidrofiltros, in turn, cleaners . . . . asserted several counterclaims. The district court dismissed Rexair’s trademark and copyright claims for lack of Paragraph 3 states: jurisdiction because the alleged acts of infringement took place in Mexico and were perpetrated by Mexican citizens. The parties agree that the Court in which this Action is It also dismissed Saltiel’s and Hidrofiltros’s counterclaims. pending [i.e., the United States District Court for the After those rulings, the only claims that remained were Eastern District of Michigan] will retain exclusive and Rexair’s contract and business tort claims. continuing jurisdiction over this Agreement and over Saltiel, Hidrofiltros and Rexair for purposes of enforcing B. The Settlement Agreement this Agreement . . . . The parties subsequently entered into the settlement C. The Present Dispute agreement at issue in this case, by which Saltiel and Hidrofiltros agreed, among other things, to pay Rexair a total Following the execution of the settlement agreement, no of $100,000.00 and to refrain from infringing Rexair’s disputes arose between the parties for almost four years. In Rainbow trademark in the future, in exchange for the May 2001, however, the situation changed. Rexair filed a voluntary withdrawal of Rexair’s remaining contract and tort lawsuit in Lisbon, Portugal, against Joao Paulo da Silva claims. The relevant provisions of the settlement agreement, Vilarinho, an individual who sold Turmix’s Robot vacuum for purposes of this appeal, are paragraphs 2a and 3. cleaners in Portugal. Rexair alleged that by importing and Paragraph 2a states: selling those vacuum cleaners, Vilarinho, through his company, Delphin Lusitana Lda, infringed its Rainbow Saltiel and Hidrofiltros agree not to use, either directly or trademark. Accordingly, Rexair requested a seizure of the indirectly (e.g., through Saltiel family members, agents, allegedly infringing products and sought an injunction employees or companies owned or controlled by or preventing Vilarinho from importing and selling them. affiliated with Saltiel), any of Rexair’s trademarks or any confusingly similar trademarks in either printed materials

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On July 5, 2001, Saltiel and Hidrofiltros filed a motion in The district court also reasoned that paragraphs 2a and 3 the district court seeking a temporary restraining order and a “simply mean that should Saltiel and Hidrofiltros, or its preliminary injunction prohibiting Rexair from proceeding agents, employees, or affiliates be found (in any court of with the Portuguese lawsuit against Vilarinho. On July 31, competent jurisdiction) to have infringed Rexair’s trademarks, after briefing and oral argument, the district court denied the then Rexair may come to this Court and sue Saltiel and motion in a telephonic hearing, reasoning that it would be Hidrofiltros for breach of the [settlement agreement] for inappropriate to enjoin an ongoing case in Portugal. On having violated ¶ 2a.” July 25, the Portuguese trial court denied Rexair’s motion for injunctive relief against Vilarinho, a decision that the Rexair argues that this appeal is frivolous and has, Portuguese appellate court affirmed on November 20.1 accordingly, filed a motion for sanctions against Saltiel and Hidrofiltros, along with their counsel, pursuant to Federal On December 6, Saltiel and Hidrofiltros filed the instant Rule of Appellate Procedure 38 and 28 U.S.C. §§ 1912 and complaint against Rexair in the district court, alleging breach 1927. of contract and seeking declaratory relief. Specifically, the complaint alleged that Rexair breached the parties’ settlement II. ANALYSIS agreement by filing “a Complaint in Portugal against an agent/employee of Saltiel, namely: Vilarinho, alleging various We review de novo a district court’s dismissal of a violations of the same or corresponding Rexair trademarks complaint for failure to state a claim on which relief can be which were at issue” in the parties’ underlying dispute. The granted. Theobald v. Bd. of Cty. Comm’rs, 332 F.3d 414, 415 complaint requested a declaratory judgment providing, among (6th Cir. 2003). While we must consider as true the well- other things, that the district court “has exclusive and pleaded allegations of the complaint and construe them in the continuing jurisdiction over Saltiel, Hidrofiltros and Rexair light most favorable to the plaintiff, we need not accept as for purposes of enforcing Rexair’s trademark(s) against true legal conclusions or unwarranted factual inferences. See Saltiel and Hidrofiltros and others as defined in ¶¶ 2a and 2c Booker v. GTE.net LLC, No. 02-6190, 2003 WL 22967930, of the Settlement Agreement and to resolve any and all at * 2 (Dec. 5, 2003). Under Michigan law, which applies in disputes which may arise between Saltiel, Hidrofiltros and this diversity case, we must enforce the terms of the Rexair only with respect to such trademark(s).” settlement agreement as written, “interpreting the unambiguous language in its plain and easily understood On May 23, the district court granted Rexair’s motion to sense.” Gelman Sciences, Inc. v. Fidelity and Cas. Co. of dismiss the complaint, holding that the settlement agreement New York, 572 N.W.2d 617, 623 (Mich. 1998) (citing Upjohn “clearly does not require Rexair to bring a trademark suit in Co. v. New Hampshire Ins. Co., 476 N.W.2d 392, 397 (Mich. this Court and indeed Rexair could not have brought a 1991)). “If the contract terms are not ambiguous, then trademark case, based on Portuguese trademark law against contradictory inferences that may be drawn are subjective and Vilarinho, a Portuguese national and owner of a Portuguese irrelevant.” Pierson Sand & Gravel, Inc. v. Pierson Twp., company, in this Court under the [settlement agreement].” 851 F. Supp. 850, 858 (W.D. Mich. 1994) (citation omitted), aff’d, 89 F.3d 835 (6th Cir. 1996). We believe, and the parties agree, that the settlement agreement is unambiguous. 1 Therefore, we are bound to enforce the plain meaning of its Rexair subsequently appealed to the supreme court of Portugal, but terms. later voluntarily withd rew that appeal.

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Saltiel and Hidrofiltros argue that the settlement agreement suggested by Saltiel and Hidrofiltros. Because Rexair’s contains an explicit promise by Rexair to forbear the initiation Portuguese lawsuit was not brought “for purposes of of foreign trademark litigation against them or their agents or enforcing” the settlement agreement, the claims asserted in affiliates in any forum other than the district court for the that lawsuit do not fall within any “exclusive” jurisdiction Eastern District of Michigan, and that Rexair has breached that the Eastern District of Michigan may possess. Therefore, that promise by filing suit in Portugal. Specifically, they Rexair did not breach the settlement agreement by filing its contend that Rexair’s Portuguese lawsuit was brought “for Portuguese lawsuit.2 purposes of enforcing” paragraph 2a of the settlement agreement because it sought to prevent an individual With respect to Rexair’s motion for sanctions, while we “affiliated with Saltiel” from infringing Rexair’s trademarks. certainly believe that the time and resources of the parties and Because paragraph 3 provides that the district court retains the Court would have been better spent on matters other than “exclusive” jurisdiction over the parties “for purposes of this appeal, we nevertheless find that the circumstances do not enforcing” the settlement agreement, Saltiel and Hidrofiltros warrant the imposition of sanctions against Saltiel or claim that Rexair breached the settlement agreement by filing Hidrofiltros, or their counsel. its lawsuit outside of that forum. For the foregoing reasons, the district court’s judgment is We disagree. Contrary to the assertion of Saltiel and AFFIRMED and Rexair’s motion for sanctions is DENIED. Hidrofiltros, the settlement agreement is completely silent as to Rexair’s ability to file a lawsuit in any forum it chooses for purposes other than enforcing the agreement. While paragraph 3 contemplates that the district court possesses “exclusive” jurisdiction over the parties “for purposes of enforcing” the settlement agreement, neither paragraph 2a nor any other provision of the agreement prohibits Rexair from pursuing other remedies that it may have in any appropriate forum. Rexair’s Portuguese lawsuit was by no means brought “for purposes of enforcing” the parties’ settlement agreement. Rather, the purpose of the Portuguese lawsuit was to prevent Vilarinho from violating Portuguese law by infringing Rexair’s trademarks. Rexair sought to enjoin Vilarinho from selling the infringing products, not to recover any damages from Saltiel or Hidrofiltros for breach of the settlement agreement or to force them to comply with its terms. 2 Counsel for Saltiel and H idrofiltros has argued that we should remand this case to the district court for an evidentiary hearing on the Had the parties intended to place additional restrictions issue of whether Vilarinho was “affiliated with Saltiel” within the upon Rexair’s right to pursue legal remedies, they certainly meaning of paragraph 2a. Th at issue is irrelevant, however, given our could have drafted their settlement agreement accordingly. con clusion that Rexair’s Portuguese lawsuit was not brought “for As written, however, the settlement agreement simply cannot purposes of enforc ing” the settlement agreement and, hence , could not fall within any “exclusive” jurisdiction that the Eastern District of Michigan be interpreted as limiting Rexair’s rights in the manner may have possessed by virtue of paragraph 3.