Faizi v. Temori

Background

Ahmad Mukhtar Faizi sued Baktash Temori, Masoud Rustakhis, and other defendants on behalf of Falafel Flame, Inc., asserting 22 direct and derivative claims. The claims relevant to this order concerned alleged unauthorized use of Falafel Flame’s federally registered service mark, FALAFEL FLAME®, by competing restaurants.

In October 2022, the court entered a preliminary injunction. Among other restrictions, it prohibited defendants from using or imitating the mark, operating four specified restaurants under the name “Falafel Flame” or using the mark, and displaying related advertising, marketing materials, signs, menus, and other physical materials. In February 2023, the court granted in part and denied in part an earlier contempt motion after defendants acknowledged that they had made no attempt to comply. The court then ordered monthly payments to Falafel Flame into an escrow account. In April 2023, it also ordered defendants to pay attorneys’ fees.

Faizi’s second contempt motion alleged that defendants still had not complied with the injunction, the earlier contempt order, or the attorneys’ fee order. He requested disgorgement of profits, coercive fines, sworn statements describing compliance efforts, and attorneys’ fees incurred in seeking compliance. Defendants did not file an opposition or evidence. Their attorney appeared at the hearing, but the defendants did not appear in person as ordered.

Court’s analysis

The court explained that civil contempt may be used to enforce a specific court order. The party seeking contempt must prove by clear and convincing evidence that the order was violated, the violation was more than technical or minor, and the conduct was not based on a good-faith and reasonable interpretation of the order. The opposing party may then show why compliance was impossible. Substantial compliance and reasonable efforts can defeat contempt sanctions.

The court found that defendants had not complied with the preliminary injunction or the later orders concerning contempt and attorneys’ fees. It determined that the noncompliance was more than technical or minor and was not based on a good-faith and reasonable interpretation of the orders. Defendants did not meet their burden of showing that they were unable to comply. The court also found that the earlier compensatory payments to Falafel Flame had not obtained compliance.

The court denied Faizi’s request for disgorgement of defendants’ profits because he provided no evidence of the defendants’ finances or a method for calculating revenue and costs needed to determine profits.

Order

The order granted in part and denied in part Faizi’s second motion concerning contempt. The court gave Temori, Rustakhis, and the other defendants covered by the injunction a final opportunity to comply by September 22, 2023. Temori and Rustakhis were required by September 29, 2023, to file sworn affidavits or declarations concerning compliance. If they claimed that they or another covered defendant could not comply, they had to notify the court and provide supporting argument and evidence by that date.

If the covered defendants remained in violation or failed to substantiate an inability to comply, fines payable to the court clerk would begin on October 2, 2023, at $50 per day against Temori and $50 per day against Rustakhis. The fines were intended to compel compliance and could be avoided by complying with the injunction. The court deferred Faizi’s request for attorneys’ fees incurred in seeking compliance and stated that it might later consider additional sanctions, including striking defendants’ answer and entering default judgment on Faizi’s first claim under the Lanham Act.

The court separately granted Faizi’s request to compel document production in part as specified in the order. The parties had to confer about priority documents, and defendants had to produce responsive, non-privileged documents by September 15, 2023. If Faizi wished to depose Temori or Rustakhis, the depositions had to be completed by October 6, 2023. The court stated that fact discovery remained closed and that the added discovery was limited to the identified document requests and those depositions. The court deferred a decision on whether to continue the February 2024 trial.