Schwartz v. Rent-A-Wreck of America
261 F. Supp. 3d 607
D. Maryland2017Background
- Schwartz operated an exclusive Rent-A-Wreck franchise in West Los Angeles and litigated with Rent‑A‑Wreck (RAWA) over franchise rights for years; final appellate rulings affirmed Schwartz’s rights and remanded to the district court.
- After the mandate, RAWA failed to promptly pay taxed costs; Schwartz moved to enforce the court’s prior March 4, 2011 order that RAWA’s call center not divert business from Schwartz’s exclusive territory.
- In April 2016, RAWA call‑center employees told prospective customers that no RAWA franchise existed in West Los Angeles or that Schwartz’s franchise had closed; Schwartz documented multiple such instances by direct calls.
- RAWA blamed a third‑party software update that purportedly removed Schwartz from the call‑center list; the court found that explanation implausible given the long, contentious history and other prior RAWA actions against Schwartz.
- The court found RAWA in civil contempt for violating the March 4, 2011 Order, rejected RAWA’s substantial‑compliance and good‑faith defenses, and concluded Schwartz suffered both lost profits and reputational harm.
- Remedies: the court ordered specific injunctive measures for RAWA’s website and a mandatory prerecorded call menu, awarded attorneys’ fees and costs tied to the contempt proceedings, and awarded compensatory damages for lost profits and reputational harm (total judgment $83,620.80).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RAWA violated the March 4, 2011 Order by diverting business via call‑center statements | Schwartz argued call‑center statements falsely told callers his franchise was closed/nonexistent, violating the Order against diverting business | RAWA argued a third‑party programming error removed franchises from the call‑center list, so any diversion was inadvertent and not a violation | Court held RAWA violated the Order; conduct was deliberate (or at minimum contemptuous regardless of intent) and harmed Schwartz |
| Whether civil contempt elements were met (valid decree, knowledge, violation, harm) | Schwartz: clear and convincing evidence met all four elements | RAWA: disputed violation and knowledge; asserted substantial compliance/good faith | Court: plaintiff met prima facie burden; RAWA failed to prove defenses; contempt established |
| Whether substantial‑compliance or good‑faith defenses excuse contempt | Schwartz: defenses inapplicable given RAWA’s history and lack of steps to assure compliance | RAWA: took no deliberate action and promptly corrected error once discovered; substantial compliance | Court: defenses rejected—RAWA did not take reasonable steps to ensure compliance and showed no good‑faith effort |
| Appropriate remedies (injunctive relief and monetary sanctions) | Schwartz sought injunctive relief, attorneys’ fees (broadly), $500,000 lost profits and reputational damages | RAWA opposed excessive damages and sought to limit remedies | Court ordered specific injunctive measures, awarded $60,000 attorneys’ fees, $2,982 costs, $6,879.60 lost profits, $13,759.20 reputational harm; total $83,620.80 |
Key Cases Cited
- Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (federal courts’ inherent power to punish contempt)
- Ashcraft v. Conoco, Inc., 218 F.3d 288 (4th Cir. 2000) (elements required to establish civil contempt)
- In re General Motors Corp., 61 F.3d 256 (4th Cir. 1995) (civil contempt remedies: coercive and compensatory sanctions)
- McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949) (absence of willfulness does not preclude civil contempt)
- Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (2017) (compensatory contempt sanctions must be calibrated to actual loss)