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Square D Co. v. Scott Electric Co.

November 14, 2007

SQUARE D COMPANY, PLAINTIFF,
v.
SCOTT ELECTRIC COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Nora Barry Fischer United States District Judge

MEMORANDUM OPINION and ORDER

This matter is before the Court on the following: (1) Plaintiff's Motion for Rule to Show Cause and for Sanctions [DE 70] (hereinafter "motion for sanctions"), filed by Plaintiff Square D Company ("Square D") on June 1, 2007; and a (2) Motion for Protective Order [DE 82] (hereinafter "motion for protective order"), filed by Defendant Globe Electric Supply Co. ("Globe") on July 9, 2007. The Court will address each motion in turn.

FACTUAL BACKGROUND*fn1

Square D is a leading manufacturer and supplier of electrical distribution products for both consumer and commercial applications. Square D's direct sales are generally confined to certain national accounts and it does not sell to any unauthorized distributors. Docket No. 31, at ¶14 (hereinafter, "Amended Complaint"). One of Plaintiff's main brands, the QO(r)circuit breaker, has been counterfeited for many years and such counterfeits are highly sophisticated and "physically indistinguishable to the untrained eye from the authentic products." Am. Compl. at ¶16. The counterfeit breakers allegedly obtained from Defendants bear the SQUARE D(r) and QO(r) trademarks and overall appear to be genuine. Id. at ¶17. However, upon installation, the overall poor interior quality of these counterfeits becomes readily clear when a short-circuit or overload occurs and the components "fail catastrophically." Id. at ¶18. A catastrophic failure may be an explosion that could send molten metal and powerful blasts of energy toward any bystanders. Id.

Defendant Globe sells electrical components, including circuit breakers. Defendant Globe is not an authorized Square D distributor. Id. at ¶36. According to the Amended Complaint, Defendant Globe knowingly purchased counterfeit breakers from Defendant ABN and others for sale to customers in the United States. Id. at ¶37. In early 2006, Defendant Globe sold an undetermined number of counterfeit breakers to Defendant Scott. Id. at ¶38.

Square D alleges that because these counterfeit circuit breakers pose a significant health and safety risk, Defendants' knowing distribution and sale of the counterfeit products have caused irreparable harm to its reputation and good will. Further, Square D alleges that it has lost profits it would have earned through the sale of authentic Square D products but for the Defendants' unlawful distribution of counterfeit products. Plaintiff Square D seeks injunctive relief to stop Defendants' unlawful activity as well as damages related to lost profits and attorneys' fees.

PROCEDURAL BACKGROUND

1. General Procedural Background

On April 7, 2006, Plaintiff Square D commenced this lawsuit by filing a Verified Complaint for alleged violations of the Lanham Act, 15 U.S.C. §§1114(1) and 11125(a)(1), and the common law of the Commonwealth of Pennsylvania, alleging that Defendants Scott Electric Company ("Scott") and Bossert's Hardware and Sporting Goods Store ("Bossert"), unlawfully imported, distributed, and sold counterfeit Square D products thereby posing a serious threat to consumer safety. On June 1, 2006, Judge Thomas M. Hardiman granted an order for injunctive and other relief that is to remain in force until the parties mutually agree to the termination of the Order's restrictions. On June 28, 2006, Judge Hardiman granted Plaintiff's Motion to Voluntarily Dismiss Bossert's Hardware, and dismissed said Defendant without prejudice or cost. (Docket No. 29). On June 29, 2006, Judge Hardiman granted Plaintiff's Motion for Leave to File Verified Amended Complaint, (Docket No. 30), which Square D filed that day, adding Defendants Edward Vaught d/b/a ABN Direct ("ABN") and Globe, (Docket No. 31).

On August 2, 2006, Defendant Scott filed a Cross-claim against Defendant ABN. (Docket No. 36).

On August 11, 2006, Square D filed Plaintiff's Motion for Entry of Agreed Order for Temporary Injunctive Relief against all Defendants, (Docket No. 37), which Judge Hardiman granted on August 21, 2006, (Docket No. 38). On October 17, 2006, Globe filed its Verified Answer, in which it denies all allegations asserted by Square D in its Amended Complaint and asserts one affirmative defense, namely that this Court lacks jurisdiction over it. (Docket No. 42). On October 30, 2006, Judge Hardiman denied as moot a Motion for Default Judgment against Defendant Globe, (October 30, 2006 minute entry), but granted a Motion for Default Judgment against Defendant ABN, permanently enjoining Defendant ABN from selling, marketing, or distributing counterfeit and authentic Square D products and ordering it to disgorge its profits from the sales of counterfeit products and to pay Square D's attorney fees and costs. (Docket No. 48).

On February 23, 2007, Judge Hardiman granted Plaintiff Square D's Motion to Compel, requiring Defendant Globe to fully respond to all interrogatories and requests to admit facts, make all of its inventory available for inspection, and pay Plaintiff Square D reasonable attorneys' fees in the amount of $2,000. (Docket No. 58).*fn2

On March 5, 2007, Judge Hardiman granted Cross-Plaintiff Scott's Motion for Default Judgment against Cross-Defendant ABN and ordered Cross-Defendant ABN to pay $261,000 in liquidated damages as immediate judgment to Cross-Plaintiff Scott. (Docket No. 62).

On March 9, 2007, the Court entered a modified discovery order, in which the Court ordered Globe (1) to produce documents responsive to Square D's production requests on or before March 16, 2007; (2) to produce its inventory of Square D products for inspection at its facility in Long Island, New York, on or before March 20, 2007; and (3) to serve its supplemental answers to interrogatories and requests to admit fact on or before April 3, 2007. (March 9, 2007 minute entry).

In response, Defendant Globe produced documents, in particular a current printout of sales of Square D circuit breakers. As a result, Plaintiff contacted Defendant Globe and informed it that it had violated the express language of the Agreed Consent Order by selling Square D circuit breakers.*fn3

2. Procedural Background as to the Instant Motions

On June 1, 2007, Square D filed the instant motion for sanctions. (Docket Nos. 70 and 71).

On June 4, 2007, Globe filed a response to Plaintiff's motion for sanctions, in which it addressed its alleged violation of the August 21, 2006 ...


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