Evoqua Water Technologies LLC v. M.W. Watermark, LLC, 1:16-cv-00014

Background

2003: U.S. Filter/JWI sued J-Parts (later M.W. Watermark, LLC) and Michael Gethin for misuse of trademarks and proprietary information; the parties settled and entered a consent judgment and permanent injunction in favor of U.S. Filter.
The consent judgment expressly bound Watermark’s "successors and assigns" but said nothing about successors or assigns of U.S. Filter.
2016: Evoqua Water Technologies (which claims to be successor-in-interest to U.S. Filter via a chain of mergers and an asset assignment) sued Gethin and Watermark, alleging violations of the permanent injunction and seeking contempt sanctions.
The district court in the 2016 action found Gethin and Watermark in contempt and awarded attorney fees to Evoqua; later the court asked briefing on whether Evoqua validly could enforce the 2003 consent judgment.
The court concluded the consent judgment did not confer enforcement rights on an assignee of U.S. Filter (Evoqua), vacated the contempt finding and dismissed Evoqua’s injunction-based claim for lack of standing; it left open Evoqua’s ability to enforce the underlying settlement agreement or intellectual-property rights via other causes of action.
The court granted in part and denied in part motions to seal: it denied sealing of the settlement agreement (public-access presumption) but granted sealing of the unrelated third-party Carve-Out Agreement itself while not sealing brief portions that quote generic provisions of that agreement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an assignee of U.S. Filter may enforce the 2003 consent judgment	Evoqua: as successor-in-interest, it should be substituted for U.S. Filter and may enforce the consent judgment	Watermark: consent judgment grants enforcement only to U.S. Filter (not its assignees); substitute not permitted	Held: No — the consent judgment lacks language extending enforcement rights to U.S. Filter’s successors/assignees, so Evoqua lacks standing to enforce it
Whether Rule 25(c) substitution changes substantive enforcement rights	Evoqua: Rule 25(c) permits substitution of a transferee and thus enforcement	Watermark: Rule 25(c) is procedural and does not create substantive rights	Held: Rule 25(c) is procedural and does not confer substantive enforcement rights absent consent-judgment language
Whether the consent judgment should be interpreted to incorporate the settlement agreement’s “heirs and assigns” clause	Evoqua: the settlement agreement says its terms "inure to the benefit" of heirs and assigns, implying assignability of enforcement	Watermark: the consent judgment is a separate judicial act and does not incorporate the settlement agreement’s assignability language	Held: The consent judgment stands on its four corners and does not incorporate the settlement agreement’s assign-by-language; enforcement rights remain with U.S. Filter only
Effect of lack of standing on contempt and related remedies	Evoqua: contempt sanctions and fees were properly awarded in the 2016 action	Watermark: sanctions improper because Evoqua lacked standing to enforce the injunction	Held: Contempt finding and sanctions vacated; Count I (injunction-based claim) dismissed for lack of standing

Key Cases Cited

Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (consent decrees not enforceable by non-parties)
United States v. Armour & Co., 402 U.S. 673 (scope of consent decrees must be discerned within their four corners)
Thatcher v. Kohl’s Dep’t Stores, Inc., 397 F.3d 1370 (Fed. Cir.) (assignee of party to consent judgment could not enforce it where judgment omitted assignability language)
Lucero v. Trosch, 121 F.3d 591 (11th Cir.) (procedural substitution may permit transferee to benefit from existing injunction in unresolved litigation)
Universal Settlements Int’l, Inv. v. Nat’l Viatical, Inc., 568 F. App’x 398 (6th Cir.) (consent judgment is hybrid of contract and judicial act; construe strictly)