Wudi Industrial (Shanghai) Co., Ltd. v. WongWudi Industrial (Shanghai) Co., Ltd. v. Wong
- Reporters:
- Before:
- King, Gregory, Rushing
KING, Circuit Judge:
In these consolidated appeals from the Eastern District of Virginia, plaintiff Wudi Industrial (Shanghai) Co., Ltd. challenges two adverse rulings made by the district court in favor of defendant Wai L. Wong and his business entity, GT Omega Racing, Ltd. (collectively “GTOR“). As explained below, we agree with Wudi‘s primary contention that the district court‘s challenged rulings constitute awards of injunctive relief in favor of GTOR and against Wudi. Secondly, we also agree that the challenged rulings failed to comport with the applicable Rules of Civil Procedure and controlling precedent. Accordingly, because the district court erred in awarding injunctive relief in these circumstances, we vacate the challenged rulings and remand for further proceedings.
I.
This litigation arises out of a contentious trademark dispute between Wudi and GTOR, which are Asian-centered business entities that compete in the marketing of video gaming chairs and other products. In March 2017, Wudi obtained from the United States Patent and Trademark Office (“USPTO“) a registration for the stylized word mark “GTRACING.” For its part, GTOR claimed that it already owned an
Seeking de novo review of the Board‘s cancellation ruling, Wudi initiated this civil action in the district court in August 2020, pursuant to
In May 2021, the parties reached a global confidential settlement of their trademark dispute and entered into a concurrent-use agreement (the “Agreement“). The Agreement established the parties’ rights and restrictions with respect to the worldwide promotion, advertisement, and sale of their gaming products. Relevant here, the Agreement assigned to Wudi the right to use the “GTRACING” word mark in all global markets — except within a so-called “European Carve Out,” which is a geographical area comprised of 53 named countries. More specifically, paragraph 6 of the Agreement provided that, within the European Carve Out, Wudi must refrain from purchasing “ad-words from Google or any other search engine or from Amazon or any other shopping site . . . and will not use on Facebook or any other social media platform . . . any terms that include (with or without other words) any of the following: [‘GT RACING‘] or [‘GTRACING‘]” See J.A. 162.1 In exchange for Wudi‘s acquisition of those rights to the “GTRACING” word mark, the Agreement required Wudi to pay to GTOR the sum of $4,500,000. The Agreement provided that, once those conditions were satisfied, a stipulated final judgment would be entered by the district court to resolve the trademark dispute underlying this litigation.
To afford the parties sufficient time to comply with the Agreement, the district court in June 2021 granted the parties’ joint motion to stay the litigation proceedings, pending entry of the stipulated final judgment. During that compliance period, however, a dispute arose in January 2022 regarding Wudi‘s alleged use of the “GTRACING” word mark within the 53 countries of the European Carve Out. Ultimately, GTOR filed with the court in April 2022 a motion for enforcement of the Agreement, alleging therein that Wudi was in breach of the Agreement‘s “ad-words” provision. More specifically, GTOR‘s motion to enforce maintained that some of Wudi‘s marketing and promotional content — which contained the “GTRACING” word mark — was yet impermissibly accessible within the European Carve Out, in contravention of paragraph 6 of the Agreement.
On April 29, 2022, the district court granted GTOR‘s motion to enforce the Agreement and — instead of entering the stipulated final judgment — ordered Wudi to “immediately cease” certain conduct. See Wudi Indus. (Shanghai) Co. v. Wong, No. 1:20-cv-00908, at 2 (E.D. Va. Apr. 29, 2022), ECF No. 103 (the “First Order“). Pursuant to the court‘s First Order, Wudi was — within 7 days — to “take down all posts [containing the “GT RACING” word mark] . . . on its proprietary
Notwithstanding the foregoing enjoining language, the district court did not make any findings of fact or conclusions of law in support of the First Order, as mandated by
On May 5, 2022, Wudi noted an interlocutory appeal of the First Order, which was filed as Appeal No. 22-1495 in this Court. Wudi then promptly sought from this Court a stay of the First Order pending its appeal, despite not having first filed such a request with the district court, nor otherwise showing or seeking to show that it would have been “impracticable” to do so. See
On May 13, 2022, because our appellate jurisdiction turned on whether the district court had actually “grant[ed] . . . [an] injunction” for purposes of
On June 2, 2022, the district court entered another order stating that — despite the First Order‘s utilization of specific enjoining language — GTOR had not requested an injunction and the First Order did not constitute a preliminary injunction. See Wudi Indus. (Shanghai) Co. v. Wong, No. 1:20-cv-00908, at 2 (E.D. Va. June 2, 2022), ECF No. 118 (the “Second Order“). Instead of offering its legal reasoning underpinning that conclusion, the Second Order stated that the First Order had been a grant of specific performance under Virginia law. At that juncture, the court entered the stipulated final judgment, again without any legal reasoning or other explanation in support thereof.
Wudi promptly appealed the Second Order in June 2022, which was filed as Appeal No. 22-1662 in this Court. Upon Wudi‘s request, we consolidated the two appeals. On June 28, 2022, although Wudi had again not previously moved for a stay
II.
A.
As a threshold matter, in our May 2022 order of limited remand, we asked whether the First Order constituted an “[i]nterlocutory order . . . granting” an injunction, which may have permitted Wudi to pursue an interlocutory appeal under
B.
On appeal, Wudi maintains, inter alia, that the First Order — as entered in the proceedings underlying Appeal No. 22-1495 — is actually a preliminary injunction that was made permanent by the Second Order. According to Wudi, because the First Order constitutes an award of injunctive relief, the district court was obliged — but failed — to adhere to the rules controlling a district court‘s award of injunctive relief, as specified in
1.
We preface our analysis by reviewing the legal landscape regarding the issuance of federal court injunctions. As previously referenced, the Federal Rules of Civil Procedure specify procedural rules that apply when a district court awards injunctive relief. For its part,
Moreover, as our Court has recognized, the terms of
The Rule was designed to prevent uncertainty and confusion on the part of those faced with injunctive orders, and to avoid the possible founding of a contempt citation on a decree too vague to be understood.
See Schmidt v. Lessard, 414 U.S. 473, 476 (1974). That is because appellate courts are entitled to understand the underpinnings of an injunction
In addition to complying with the applicable Rules of Civil Procedure, and because injunctive relief is a “drastic and extraordinary remedy” to be utilized sparingly, the district court is duty bound to ensure that the party seeking injunctive relief has made the requisite showings. See SAS Inst., Inc. v. World Programming Ltd., 952 F.3d 513, 528 (4th Cir. 2020) (internal quotation marks omitted). Under the Supreme Court‘s eBay decision of 2006, a party seeking permanent injunctive relief must demonstrate the following:
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
At bottom, if a district court has applied the four-factor eBay test and awarded an injunction, we review that decision for abuse of discretion. See Mountain Valley Pipeline, LLC v. 6.56 Acres of Land, 915 F.3d 197, 213 (4th Cir. 2019) (internal quotation marks omitted). Of importance, an error of law is by definition an abuse of discretion, and such an error is alone “grounds for reversal.” Id.
2.
a.
Against this backdrop, we must address the question of whether the First Order actually constitutes an injunction. As we explained in our May 2022 remand order, the “magic word” injunction is not required for an order of a district court to be an injunction. See Wudi Indus. (Shanghai) Co. v. Wong, No. 22-1495, at 1-2 (4th Cir. May 13, 2022), ECF No. 26 (internal quotation marks omitted) (citing Union Oil Co. v. Leavell, 220 F.3d 562, 566 (7th Cir. 2000)). Several of our sister circuits have recognized that a court order must satisfy two requirements to be an injunction: (1) the order must describe the specific conduct required in detail; and (2) the order must provide a deadline to act. See, e.g., Petrello v. White, 533 F.3d 110, 116 (2d Cir. 2008) (describing the previously identified two components of injunctions); see also Sheet Metal Workers’ Int‘l Ass‘n Loc. 19 v. Herre Bros., 201 F.3d 231, 238 (3d Cir. 1999) (same); Parker v. Ryan, 960 F.2d 543, 545 (5th Cir. 1992) (same); Marseilles Hyrdo Power, LLC v. Marseilles Land & Water Co., 299 F.3d 643, 646 (7th Cir. 2002) (same); Westar Energy, Inc. v. Lake, 552 F.3d 1215, 1222 (10th Cir. 2009) (same). As the Seventh Circuit has explained, an injunction order also requires the enjoined party to “perform enumerated
In the circumstances presented, we agree with Wudi that the First Order constitutes a preliminary injunction. And that preliminary injunction was thereafter made a permanent injunction by entry of the Second Order. In reaching that conclusion, we assess the text of the First Order itself and simply “adhere to the time-tested adage: if it walks like a duck, quacks like a duck, and looks like a duck, then it‘s a duck.” See BMC Indus., Inc. v. Barth Indus., Inc., 160 F.3d 1322, 1337 (11th Cir. 1998). Importantly, however, we have heretofore observed that, “[i]f something looks like a duck, walks like a duck, and talks like a duck, and the district court determines it to be a duck, it is not our place on review to call it something else.” See Lane v. United States, 286 F.3d 723, 730 (4th Cir. 2002).
In contrast to the observation made by our Court in the Lane case, the opposite is true here. That is, the First Order “looks like [an injunction], walks like [an injunction], and talks like [an injunction],” yet the district court nevertheless ruled that it is not an injunction. See Lane, 286 F.3d at 730. In making our assessment, we observe that “the absence of any semblance of effort by the District Court to comply with
Our conclusion that the First Order constitutes a preliminary injunction — later made permanent by the Second Order — garners strong support from the Eleventh Circuit‘s 2008 Van Antwerp decision. See 526 F.3d at 1358. Although in the context of analyzing its collateral order jurisdiction under
To that end, we emphasize that the First Order possesses all of the necessary attributes and thus qualifies as an injunction order. That is, the First Order contains “clear, enforceable directives” and threatens Wudi with contempt for noncompliance. See Van Antwerp, 526 F.3d at 1358. It repeatedly uses the phrase “immediately cease” with respect to specific conduct, and it directs Wudi to comply with those commands “within seven days.” See First Order 1-2. And the First Order is both mandatory and prohibitory — it requires Wudi “to abide by an agreement,” see Int‘l Longshoremen‘s, 389 U.S. at 75, yet it also prohibits Wudi from engaging in a broad range of conduct (some of which is arguably outside the Agreement‘s scope). We therefore readily conclude that, “however [the First Order] might be characterized” by the district court, it is — factually and legally — “an order granting an injunction.” Id. at 75-76.
Adopting a position similar to that espoused by the district court in the Second Order, GTOR resists our straightforward conclusion that the First Order was a preliminary injunction. It instead argues that the First Order was actually a grant of specific performance under Virginia law. According to GTOR, the First Order was not an injunction, but merely a command that Wudi abide by the Agreement. As a result, GTOR maintains that the court was never obliged to adhere to
Put simply, we are constrained to reject GTOR‘s characterization of the First Order. That is, in light of the Agreement‘s contested terms, we doubt that the First Order actually “compels the performance of a contract in the precise terms agreed upon” by the parties. See Rison, 18 S.E. at 919 (emphasis added). But if we were to assume that the First Order is merely a grant of specific performance, GTOR‘s position suffers from a crucial and fatal infirmity: “[i]f there is a factual dispute over . . . [an] agreement‘s terms, the district court may not enforce a settlement agreement summarily.” See Hensley v. Alcon Lab‘ys, Inc., 277 F.3d 535, 541 (4th Cir. 2002). As we recognized in our Hensley decision, “when such factual disputes arise, the court must conduct a plenary evidentiary hearing in order to resolve that dispute, . . . and make findings on the issues in dispute.” Id. (internal quotation marks omitted). On that score, the parties’ appellate positions readily confirm that factual disputes are present here. As such, the district court would be obliged to conduct appropriate evidentiary hearings and “make findings on the issues in dispute.” Id.
3.
Given that the First Order is a preliminary injunction which was rendered permanent by the Second Order, it is apparent that the district court made procedural errors that amount to abuses of its discretion. Foremost, the First Order fails to comply with
We
C.
Finally, we recognize the fact that Wudi also presents several merits-based contentions in these consolidated appeals. Because we vacate the challenged rulings on procedural grounds, however, we do not resolve any merits-based contentions. Those issues are reserved for the district court on remand.4
III.
Pursuant to the foregoing, we vacate the challenged rulings and remand for such other and further proceedings as may be appropriate.
VACATED AND REMANDED
RUSHING, Circuit Judge, dissenting:
Wudi appeals the district court‘s order enforcing its Settlement Agreement with GTOR, which the parties entered in 2021 to settle a trademark dispute. At the parties’ request, the district court stayed the case and retained jurisdiction while they came into compliance with the Agreement‘s directives pursuant to its internal deadlines. During the stay, GTOR moved to enforce the Agreement, claiming that Wudi refused to comply with paragraph 6(b). In response, Wudi admitted its conduct but argued that GTOR misinterpreted paragraph 6(b). After receiving briefing and holding a hearing to consider the parties’ arguments, the district court found Wudi in breach of the Agreement and ordered Wudi to comply by following a series of detailed steps.
Unlike the majority, I agree with the district court—and the parties, as they presented the case there—that the court‘s order is the summary enforcement of a settlement agreement. Because the district court correctly followed our longstanding precedent for resolving motions to enforce settlement agreements, I respectfully dissent.
I.
The procedures a district court must follow when it resolves a motion to enforce a settlement agreement over which it has ancillary jurisdiction are well settled. If resolving the motion requires adjudicating material factual disputes, the district court may not summarily enforce the settlement
Under this settled law, the district court could summarily enforce GTOR and Wudi‘s Settlement Agreement. GTOR alleged that some of Wudi‘s social media posts breached paragraph 6(b) of the Agreement. Neither party contested below—or disputes on appeal—that paragraph 6(b) is a valid term of an enforceable settlement agreement. And Wudi did not contest that it or one of its affiliates made the social media posts that contained the trademarks listed in paragraph 6(b). With the material facts concerning the Agreement‘s existence, its terms, and Wudi‘s allegedly breaching conduct not in dispute, the parties’ arguments turned on how to interpret paragraph 6(b) and apply it to Wudi‘s conduct.
The meaning of paragraph 6(b) is a legal question. The Agreement provides that Virginia law controls its interpretation. “Under governing Virginia law, settlement agreements are treated as contracts subject to the general principles of contract interpretation.” Byrum v. Bear Inv. Co., 936 F.2d 173, 175 (4th Cir. 1991); see, e.g., Yourko v. Yourko, 884 S.E.2d 799, 804 (Va. 2023); Southerland v. Est. of Southerland, 457 S.E.2d 375, 378 (Va. 1995). And “[t]he interpretation of a contract presents a question of law.” PMA Cap. Ins. Co. v. US Airways, Inc., 626 S.E.2d 369, 372 (Va. 2006); see also Kay Co. v. Equitable Prod. Co., 27 F.4th 252, 258 (4th Cir. 2022) (“A district court‘s analysis of a settlement agreement is a matter of contract interpretation, a legal issue that we review de novo.“). So resolving GTOR‘s motion to enforce the Agreement required the district court to decide a question of law and apply it to undisputed facts. Moreover, the district court could reasonably consider Wudi‘s unclean hands “excuse for nonperformance [to be] comparatively unsubstantial.” Millner, 643 F.2d at 1009 (internal quotation marks omitted). Accordingly, our precedent allowed the district court to summarily enforce the parties’ Agreement.
The majority recognizes that our precedent requires a plenary evidentiary hearing “‘if there is a factual dispute over . . . [an] agreement‘s terms‘” and asserts such a dispute exists here. Supra, at 14 (brackets and ellipsis omitted; emphasis added) (quoting Hensley, 277 F.3d at 541). Tellingly, however, the majority does not cite any concrete factual dispute in support of its conclusion. The parties agree that they entered into an enforceable Settlement Agreement and that paragraph 6(b) is a valid term in the Agreement. Moreover, Wudi concedes that it or one of its affiliates made the social media posts that formed the basis of GTOR‘s motion to
At points, the majority suggests the district court‘s order cannot be an order for specific performance enforcing the Settlement Agreement, as the district court said it was, because it “arguably” commands Wudi in terms beyond what the Agreement itself requires. Supra, at 13. That is a potentially valid concern about the merits of the district court‘s enforcement order. But it is not a reason to reject the district court‘s characterization of the proceedings before it and to send this case back for a do-over on an injunction motion that was never filed by GTOR or considered by the court.
Nor does the majority‘s analogy to Sierra Club v. Van Antwerp, 526 F.3d 1353 (11th Cir. 2008), undermine the conclusion that the district court here ordered specific performance. Supra, at 12–13. Quite unlike this case, the district court‘s “Remedies Order” in Van Antwerp followed a grant of summary judgment on a challenge to Clean Water Act permits brought under the Administrative Procedure Act. See Van Antwerp, 526 F.3d at 1356, 1358. The district court gave “clear, enforceable directives” granting the relief “that Sierra Club requested in its complaint.” Id. at 1358. The case did not involve remedying a breach of contract or enforcing a settlement agreement. The court did not purport to be interpreting and compelling specific performance of mutually agreed-upon terms, as the district court did here. See, e.g., Ford v. Citizens & S. Nat‘l Bank, 928 F.2d 1118, 1122 (11th Cir. 1991) (“The motion to enforce the settlement agreement essentially is an action to specifically enforce a contract.” (internal quotation marks omitted)); Saber v. FinanceAmerica Credit Corp., 843 F.2d 697, 702 (3d Cir. 1988) (“A settlement agreement is a contract, and an order enforcing a contract is ordinarily described as an order for specific performance.“). Thus, the Van Antwerp court‘s jurisdictional ruling is of little help in discerning what species of equitable relief—or fowl, in the majority‘s parlance—is present here.
II.
The majority breaks new ground by holding that a party requesting enforcement of a settlement agreement must satisfy the four-factor test of either Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008), or eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), or both. These tests are prerequisites to obtaining preliminary or permanent injunctive relief. But neither applies in this context, and it is a mistake to require their application both in this case and more generally to motions seeking to enforce settlement agreements.
For starters, our precedent has not required district courts to apply Winter or eBay before enforcing settlement agreements over which they have ancillary jurisdiction. See, e.g., Swift, 636 Fed. App. at 155–156; Topiwala, 509 Fed. App. at 187. Indeed, the majority cites no authority—from any court—for doing so; neither does Wudi.
Requiring a district court to undertake a separate Winter or eBay analysis before enforcing a settlement agreement gives the court authority to supersede the parties’ intentions as expressed in their agreement, such as by reweighing the balance of equities between the parties. And when it comes to the final enforcement of a settlement agreement, the majority‘s approach weakens the stability and finality that settlement offers because it allows a party with buyer‘s remorse to rely on eBay‘s second factor to undermine a settlement agreement whenever it concludes paying damages would be more palatable than keeping its end of the original bargain. The majority fails to grapple with these potential consequences.
Moreover, the facts belie the majority‘s insistence that the First Order “was a preliminary injunction,” supra, at 13, that must “satisfy the four-factor Winter test,” supra, at 15. Recall that the first Winter factor requires a court to assess whether the moving party ”is likely to succeed on the merits.” 555 U.S. at 20 (emphasis added). That question was not at issue below. GTOR charged Wudi with violating the Agreement‘s restrictions on social media advertising and asked the district court to “enter an order requiring Wudi to take the actions necessary to comply with” the Agreement. J.A. 116. No assessment of whether GTOR would likely prevail in the future on its claim that Wudi breached the Agreement was necessary or requested. Instead, GTOR asked the court to proceed directly to the merits, and the court did so when it found Wudi in breach and ordered it to come into compliance with the Agreement. Thus, the First Order was not “a preliminary injunction” that “preserve[d] the status quo pending a final trial on the merits,” Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 422 (4th Cir. 1999), but rather a decision resolving the merits and ordering Wudi to specifically perform its duties under the Agreement. By labeling such an order a preliminary injunction and mandating that the district court apply Winter, the majority creates confusion for lower courts going forward.
Even though our precedent permitted the district court to summarily enforce the parties’ Settlement Agreement, the district court still had to comply with the Federal Rules of Civil Procedure when it issued its enforcement order. I agree with the majority that the district court had to follow
Beginning with
To order specific performance of the Agreement, the district court had to comply with
The district court satisfied these requirements. Regarding the reason for the order, the court found Wudi to be “in breach of Paragraphs 6(b) and 11 of the Settlement Agreement” by using forbidden trademarks in the European Carve-Out. Wudi Indus. (Shanghai) Co. v. Wong, No. 1:20cv908-CMH-MSN, 2022 WL 2187419, at *1 (E.D. Va. Apr. 29, 2022); see
IV.
Because the district court did not commit a reversible procedural error, I would reach the merits of Wudi‘s appeal. However, the majority has remanded the case without opining on the merits of the district court‘s decision, so I similarly do not address the parties’ merits arguments.
Notes
Pursuant to the Supreme Court‘s Winter decision of 2008, a party seeking preliminary injunctive relief is obliged to demonstrate the following:
[1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.
See Winter v. Nat‘l Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).