Max's Seafood Cafe, by Lou-Ann, Inc., Successor to Max's Seafood Cafe, Inc. v. Max Quinteros Jack-Mack, LLC and All Others in Active Concert or Participation With Jointly, Severally, and in the Alternative
Docket: 19-1922
Court: Court of Appeals for the Third Circuit; May 5, 1999; Federal Appellate Court
Max Quinteros and Jack-Mack Seafood, LLC, appeal a District Court ruling that found them in civil contempt for violating a consent order that Quinteros had previously agreed to, which prohibited him from misrepresenting his association with Max's Seafood Cafe. Quinteros argues that he should not be held accountable for violations committed by Frank Miraglia, while Jack-Mack contends it cannot be in contempt as it was not established at the time of the violations.
Max's Seafood Cafe, established in Gloucester City, New Jersey, has been operating since at least 1940. Quinteros purchased it in 1977 and sold it to Lou-Ann, Inc. in 1983. A trademark infringement lawsuit was filed by the subsequent owner, Stephen Renzi, in 1990, leading to a consent order that restricted Quinteros and others from using names or designations that could confuse consumers about their association with Max's Seafood Cafe. The order allowed Quinteros to use the name "Max" in advertisements if followed by "Quinteros."
In 1992, Lou-Ann reacquired the restaurant. In 1995, Quinteros began working at a restaurant owned by Miraglia but was later accused by Lou-Ann’s attorney of misrepresenting his connection to Max's Seafood Cafe. Although initially not pursued, the matter resurfaced in 1997 when Quinteros and his wife returned to the restaurant under the new entity Jack-Mack Seafood, LLC, which began advertising the Bayshore Seafood Restaurant while identifying Quinteros.
Lou-Ann, representing Max's Seafood Cafe, initiated a contempt proceeding against Quinteros and his new corporation, Jack-Mack, on September 3, 1997, alleging violations of a consent order. The District Court held a hearing on October 14, 1997, where Lou-Ann claimed Quinteros had been violating the order since April 1995 by referring to himself as "the original Max" and by featuring the name "Max" prominently in advertisements. Lou-Ann also alleged that Jack-Mack aided and abetted these violations, though specific acts were not identified.
On December 18, 1997, the District Court ruled that the advertisements did not violate the consent order. The court deemed the testimony regarding Quinteros's oral communications vague and found no evidence of such statements occurring post-August 1996, leading to a conclusion that those allegations were barred by laches. However, the court determined that Frank Miraglia referred to Quinteros as the "original Max" on about twenty-five occasions, establishing Quinteros’s indirect liability due to his influence over Miraglia, despite his attempts to prevent such references.
The court ruled Quinteros in contempt for not adequately ensuring compliance with the order. It also found Jack-Mack in contempt without detailing the rationale. As a remedy, the court mandated advertisements to include a disclaimer about affiliation with Max's Seafood Cafe, imposed fines of $25 on both Quinteros and Jack-Mack, and awarded attorney's fees to Lou-Ann, pending a fee petition. Quinteros and Jack-Mack objected to the fee petition, which remains unresolved as the court has reserved its decision pending appeal.
Quinteros and Jack-Mack filed a motion for reconsideration, asserting three main points: (1) Quinteros should not be liable for Miraglia's violations of the consent decree due to their business relationship; (2) Jack-Mack cannot be liable for violations as it was not incorporated until June 1997, after the violations occurred; and (3) the District Court incorrectly failed to hold Frank Miraglia in contempt. The District Court denied the motion, finding the arguments insufficient for reconsideration.
In their appeal, Quinteros and Jack-Mack identified four errors by the District Court: (1) misapplication of law regarding Quinteros' contempt based on Miraglia's statements; (2) misapplication of law in holding Jack-Mack in contempt for third-party statements made before its formation; (3) failure to dismiss the plaintiff's claim under the doctrine of laches; and (4) failure to award attorney's fees to Quinteros and Jack-Mack concerning the print advertisements issue.
The appeal reviews the first issue under plenary review, while the second involves mixed questions of law and fact, newly raised in the reconsideration motion. The denial of reconsideration is typically reviewed for abuse of discretion, but issues of law are reviewed de novo, and factual findings are reviewed for clear error.
Quinteros contested the District Court's finding of contempt, arguing that violations were solely attributed to Miraglia. The District Court had determined that Quinteros was in contempt due to inadequate efforts to ensure Miraglia's compliance. However, the consent order does not obligate Quinteros to monitor compliance by others, only prohibiting him and his associates from violating its terms. The court's interpretation of the consent decree was strict, focusing solely on its written terms rather than broader implications. Consequently, Quinteros' liability could only be established through aiding and abetting or imputation, neither of which were substantiated by the District Court's reasoning based on mere business association.
Knowledge of a court order and abetting another in its violation constitutes contempt, as established in Roe v. Operation Rescue and Quinter v. Volkswagen of Am. A party cannot evade contempt liability by merely delegating the prohibited actions to others. However, the District Court did not find evidence that Quinteros instigated or endorsed Miraglia's violations; rather, it determined that Quinteros urged Miraglia to comply with the order. Thus, mere business association with Miraglia does not establish Quinteros's liability for Miraglia's actions.
Lou-Ann argued that the injunction applied not only to Quinteros but also to those acting in concert with him. The District Court acknowledged this but clarified that it was not basing its ruling on the existence of a partnership between Quinteros and Miraglia. The phrase "in active concert or participation" does not imply vicarious liability for another's violations but indicates who may be bound by an injunction, consistent with Federal Rules of Civil Procedure.
Lou-Ann further posited that Quinteros should be treated similarly to a union, which can be held liable for its members' unlawful actions if it fails to take steps to prevent them. However, this analogy does not apply in this context, as the court's rationale focuses on the specifics of liability and the limitations imposed by due process.
Certain federal labor law doctrines are not universally applicable, particularly in cases outside the labor context. The scope of courts' equitable powers in labor disputes involves unique policy considerations and is influenced by specific statutes, such as the Norris-LaGuardia, Taft-Hartley, and Landrum-Griffin Acts. There is a fundamental distinction between the relationship of union officers and members and that of individuals in business partnerships, making direct analogies inappropriate.
The court declines to extend the principles established in Eazor and United States Steel due to the Supreme Court's disapproval of those interpretations in Carbon Fuel Co. v. UMWA. The Supreme Court clarified that unions cannot be obligated to prevent strikes they did not authorize, aligning union liability with common law agency principles. Consequently, the principles Lou-Ann suggests for liability are dismissed as irrelevant.
Instead, the court looks to vicarious liability in business contexts, referencing Wilson v. United States, where the Supreme Court established that corporate officers can be held in contempt for failing to ensure the corporation complies with legal obligations, effectively linking their responsibilities to the corporation's actions. The Fourth Circuit's Colonial Williamsburg Foundation v. Kittinger Co. further illustrates this point, as the court found corporate leaders in contempt due to their failure to enforce compliance with a consent judgment, despite a lack of specific misconduct findings against one individual.
The Court of Appeals for the Fourth Circuit dismissed Carlow's arguments, emphasizing that he failed to read the judgment served to him and subsequently acknowledged Kittinger's past relationship with Colonial Williamsburg. The court held that, as President of Kittinger, Carlow had a duty to ensure compliance with the consent judgment but demonstrated a "studied disregard" for the court order by not taking necessary actions, despite claiming to delegate authority to Defino.
In contrast, Quinteros was not held to the same standard of liability. Unlike the CEOs in related cases, the court found no evidence placing Quinteros in a position of similar responsibility for Frank's Place, as the District Court was hesitant to classify him as a partner despite his financial returns. Quinteros read the injunction and instructed Miraglia to stop misidentifying him, indicating he did not disregard the order.
Furthermore, Lou-Ann's assertion that Quinteros should be found in contempt for not demonstrating "good faith" compliance was deemed irrelevant. The cited Harris case involved a situation where the City of Philadelphia attempted to avoid liability for its own violations, while Quinteros was not under a court order to prevent others from violating the injunction. His actions to address Miraglia's violations were not compelled by the court, thus he could not be held in contempt for their failure. The court concluded that all grounds for attributing liability to Quinteros were inapplicable, resulting in a finding that the District Court erred in holding him in contempt for Miraglia's actions.
Jack-Mack contends that it should not be held in contempt for Miraglia's statements because it was not an entity at the time the statements were made. The District Court determined that the contemptuous acts occurred before August 1996, while Jack-Mack was incorporated on February 24, 1997, after these events. Following Quinteros' acquisition of the restaurant from Miraglia on April 23, 1997, Miraglia ceased his contemptuous actions. Thus, there is no evidence linking Jack-Mack to Miraglia that would justify imposing liability for the latter's statements.
Lou-Ann, aiming to uphold the District Court's ruling, argues that Jack-Mack’s failure to present its certificate of incorporation before its motion for reconsideration negated its defense. However, this omission is not deemed detrimental to Jack-Mack's position. The purpose of a reconsideration motion is to address significant errors or new evidence. The District Court denied reconsideration, citing no changes in law or new evidence, but did not evaluate whether holding Jack-Mack in contempt constituted a clear legal error or manifest injustice.
The court generally views issues raised for the first time in post-judgment motions unfavorably, but Jack-Mack's fundamental argument—that it did not exist until after Miraglia's actions—merited consideration. Given that Lou-Ann, who sought to hold Jack-Mack liable on an aiding and abetting theory, did not present evidence to support this claim during the contempt hearing, Jack-Mack likely believed its incorporation date was irrelevant in light of the lack of evidence against it.
Jack-Mack cannot be held liable for the actions and statements of Miraglia, as it did not acquire the restaurant until April 1997, after Miraglia's departure. Lou-Ann's new argument for affirming the District Court's judgment against Jack-Mack based on 'successor liability' was not raised in the lower court and lacks sufficient evidence or specifics regarding the parties' arrangements. Lou-Ann's claims are vague, suggesting only that Jack-Mack is a successor to Miraglia's prior operations without demonstrating a clear, ongoing violation. The District Court did not find Jack-Mack liable for any continuous wrongdoing, as the violations attributed to Miraglia were discrete and had ceased nearly a year before Jack-Mack's acquisition. Therefore, the court's refusal to reconsider its order based on Jack-Mack's incorporation evidence was a clear error of law and fact. The conclusion is that the District Court should have granted reconsideration.
The court has determined that it will not address the laches issue presented by the appellants due to the reversal of the contempt finding against them, which also invalidates the attorney's fees awarded to Lou-Ann. Quinteros and Jack-Mack contend that since they successfully defended against Lou-Ann's print advertising claim, the District Court incorrectly denied them counsel fees, and they plan to extend this argument to the contempt order. The existing consent order stipulates that the prevailing party in enforcement actions is entitled to counsel fees. Consequently, the matter is remanded to the District Court for consideration of this provision and further proceedings. The judgment finding Quinteros and Jack-Mack in contempt is reversed, and the case is sent back for actions consistent with this ruling. Additionally, the District Court did not hold Miraglia in contempt due to concerns over his lack of representation, a decision that has not been appealed. Relevant statutory provisions concerning labor disputes are also noted, emphasizing the limited liability of labor organizations for the actions of their members or agents.
