Showcoat Solutions, LLC v. Butler

          RECOMMENDATION OF THE MAGISTRATE JUDGE ^[1]

          STEPHEN M. DOYLE UNITED STATES MAGISTRATE JUDGE

         Pending before the Court is Plaintiff's Motion for Contempt (Doc. 30), Defendant's Counter Motion for Contempt (Doc. 38), and Plaintiff's Supplemental Brief in Support of Motion for Contempt (Doc. 61). On May 8, 2019, the undersigned Magistrate Judge held a hearing on the motions. For the reasons that follow, it is the recommendation of the undersigned that Plaintiff's Motion for Contempt (Doc. 30), as supplemented, be granted in part and denied in part, and that Defendant's Counter Motion for Contempt (Doc. 38) be denied.

         I. DISCUSSION

         A. Background

         Showcoat Solutions, LLC, (“Plaintiff”) is a company that sells hair-growth products in the agricultural industry. See generally (Doc. 76) at 4-5. This case arises from allegations that Defendants stole Plaintiff's product formulas and used those formulas to manufacture and sell their own products under the name Code Blue, as well as allegations that Defendants created and sold counterfeit goods using Plaintiff's ShowCoat and other n a m e s, likenesses, and intellectual property. See generally (Doc. 76).

         Contemporaneous with its Complaint, Plaintiff filed a Motion for Temporary Restraining Order (Doc. 2), which alleged irreparable and immediate harm resulting from Defendants' alleged counterfeiting and sale of Plaintiff's products. The United States District Judge previously assigned to the case held a hearing on the Motion, but was unable to conclude the hearing in the time allotted. Therefore, the District Judge entered an interim Order, which was agreed to by the parties, and continued the hearing for a later date. See (Docs. 11, 12). On the day before the hearing was to continue, the parties filed a Joint Motion for Order to Cancel Hearing and Enter Consent Interlocutory Injunction (Doc. 18). The Court granted the parties' request, cancelled the hearing, and entered the proposed Interlocutory Injunction, which reads, in relevant part:

1. All Defendants shall cease using the name “ShowCoat, ” “Volumax, ” “Pop Shot, ” or using the ShowCoat or similar marks in the manufacture, marketing, or sale of any goods, or acting in concert with others to do the same;

2. All Defendants shall not manufacture, market, or sell any products developed in whole or in part from the ShowCoat formula or acting in concert with others to do the same;

3. All parties shall preserve and demand the preservation of all computers, computer tablets, phones, smart phones, external media (CDs, thumb drives, external hard drives, and the like), servers, cloud-based storage, and email accounts on which they have stored any communication or information with, about, referring to and/or relating to ShowCoat, ShowCoat's marks, ShowCoat's formula;

4. All parties shall preserve and demand the preservation of all materials related to the manufacture, marketing, or sale of livestock hair-enhancement products. Nothing herein prevents any party from carrying on its normal business operations except as otherwise prohibited by this order;

5. Plaintiff, its agents, officers, and members shall refrain from using Defendants' names or disclosing identifying information about Defendants in connection with this matter, or acting in concert with o thers to do the same. In addition, Plaintiff shall delete, destroy, or remove, to the extent possible, all press releases, announcements, social media posts, or any other public materials it has produced using Defendants' names or disclosing identifying information about Defendants in connection with this matter. Nothing herein prevents Plaintiff from informing the public that Wilson and Butler are no longer dealers for Plaintiff, nor that there may be counterfeit products in circulation in the market, but such information shall not be presented in a way that implicates Defendants or associates them with wrongdoing;

6. No security will be required at this time;

7. This order shall remain in effect during the pendency of this litigation and until further order of the court[.]

(Doc. 19).

         B. The Parties' Motions

         On December 5, 2018, Plaintiff filed its Motion for Contempt (Doc. 30). Plaintiff argues that Defendants Chris Wilson (“Wilson”) and Andy Butler (“Butler”), (collectively “Defendants” for purposes of this recommendation), have not complied with this Court's Interlocutory Injunction because of certain social media posts appearing on their Twitter and Facebook pages. See generally (Doc. 30). According to Plaintiff, Defendants' posts use the name “ShowCoat” “in the manufacture, marketing, or sale” of Defendants' product, Code Blue, which competes with ShowCoat and is allegedly created by the misappropriation of ShowCoat trade secrets. Id. at 4.

         In response, Defendants assert that, after the Interlocutory Injunction was entered, they “attempted to remove all references to ShowCoat from their various social media accounts, but because of the volume of material on these accounts, some items were missed.” (Doc. 38) at ¶ 1. Defendants further note that, although they believe the posts at issue do not actually violate the Interlocutory ...