The opinion of the court was delivered by: MOTLEY
Plaintiff's motion for attorney's fees for defendant's contempt of court for numerous violations of a Final Consent Decree between the parties is before the court after the remand from the Second Circuit Court of Appeals.
The Court of Appeals reviewed two prior orders of this court issued in 1994 and 1995 (the "1994 Order" and the "1995 Order", respectively) in which this court found defendant New Line Cinema in contempt. The Court of Appeals affirmed certain portions of the 1994 Order but vacated other portions thereof, determining that these latter portions exceeded the scope of the original agreement between the parties. In turn, the Court of Appeals vacated the entire 1995 Order because it was founded on defendant's failure to comply with those portions of the 1994 Order that the Court of Appeals considered improper.
In its 1994 and 1995 Orders, this court had also awarded plaintiff attorney's fees for the costs it had incurred in prosecuting defendant for contempt. The Court of Appeals remanded the matter back to this court for reconsideration of the issue of attorney's fees in light of the vacatur of portions of the 1994 Order and the entirety of the 1995 Order. Upon remand, there are certain essential elements of the law of contempt that the court will need to address. First, a party cannot be held in contempt unless it has violated a clear, unambiguous and legal order of the court. Second, an award of attorneys fees for civil contempt can only be based on a finding that such contempt was willful. In order to determine the instant request for attorney's fees, this court must review its earlier award in light of the Court of Appeals' decision as it relates to these essential elements of the law of contempt. Specifically, the Court of Appeals noted that defendant's actions "may have been careless" but expressed "reluctance to conclude that the noncompliance was willful." 65 F.3d 1051, 1063 (2d Cir. 1995).
Although the facts of the underlying case are set forth in the various judicial opinions issued with regard to the matter,
and familiarity therewith is assumed, this opinion details those matters relevant to the instant motion.
This action was commenced by plaintiff Stephen King (hereinafter "plaintiff") in 1992. Plaintiff sought injunctive and monetary relief against defendant Allied Vision and its subsidiaries New Line Cinema and Innovation Books for the alleged misattribution to plaintiff of the motion picture entitled "The Lawnmower Man" (hereinafter "the film") through use of both "possessory" and "based upon" credits in violation of, inter alia, § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). In July of 1993, this court conducted a three day evidentiary hearing on plaintiff's request. Subsequently, a preliminary injunction order was issued prohibiting numerous defendants from utilizing King's name in connection with the film. Upon review of this order, the Second circuit affirmed the preliminary injunction to the extent that it prohibited the use of the possessory credit but reversed that portion of the injunction regarding defendants' use of a based upon credit, although both issues were to be considered at trial. King v. Innovation Books, 976 F.2d 824 (2d Cir. 1992). In May of 1993, before commencement of the trial, the parties entered into a Settlement Agreement, with Final Consent Decree, which settled the underlying action. On May 17, 1993, the Settlement Agreement and Final Consent Decree were approved by this court.
The provisions of the Final Consent Decree (hereinafter "the Decree") set forth numerous obligations for defendants. Paragraph 1(a) of the Decree prohibited, inter alia, defendants from using King's name worldwide in connection with the film. Paragraph 2 required the immediate distribution of a copy of the Decree by defendant New Line to all entities participating in the distribution or other commercial exploitation of the film. The parties also agreed that the Decree would be accompanied by a Letter of Instruction, the text of which was set forth in an exhibit to the Decree, that explained the Decree in simple terms and demanded the recipients' compliance therewith.
Paragraph 4 of the Decree required that defendants supply all entities that had received distribution of video copies of the film with "paste-over" stickers to conceal King's name from all existing and future inventory of such videos, or alternatively, new sleeves making no reference to plaintiff.
Similar to the obligations of P 2, these corrective products were to be accompanied by a detailed letter demanding that the recipients of these products take corrective steps using the enclosed materials and informing them of the terms of the Decree.
Paragraph 6 of the Decree required defendants to supply plaintiff's counsel with affidavits "describing with particularity the efforts undertaken by each of them to effectuate compliance" with the requirements of the Decree. (Decree at P 6.)
Soon after execution of the Decree, King returned to the court alleging that defendant New Line was not complying with the terms of the Decree and seeking a civil contempt order against defendant. Citing numerous instances of defendant's failure to comply with the Decree, in an Order with Memorandum Opinion dated March 25, 1994 (the "1994 Order"), this court found defendant in contempt and assessed damages and attorney's fees against defendant. First, it was determined that defendant did not provide its licensees and distributors with a copy of the Decree and the required letter until June 14, 1993 -- more than three weeks following the execution of the Decree -- and that this delay was in violation of defendant's obligations under P 2 of the Decree, which required defendant to take "immediate steps" to carry out this task. Second, that defendant violated P 4 of the Decree in several ways: 1) it failed to distribute proper corrective stickers for tapes in the existing inventories of wholesalers and retailers in a mailing which took place in early July 1993 (the "first mailing") and failed to take any corrective steps with regard to the flawed stickers until, at the earliest, August 13, 1993 (the "second mailing"), although it knew of the problem more than a month before;
2) the first and second mailings were both carried out by third class rather than certified mail, as required by the Decree; 3) without assessing the amount of corrective material each retailer might need, defendant sent an arbitrary number of both stickers (eight) to each retailer in the first mailing and new sleeves (ten) to each retailer in the second mailing; and, 4) defendant failed to send the required demand letter to accompany the corrective materials.
Third, this court found that the affidavits defendants submitted to plaintiff pursuant to P 6 of the Decree that were supposed to detail defendant's compliance efforts were actually false and misleading.
Defendant was ordered to "take any action necessary to cure the contempt at all wholesale and retail outlets within thirty days of this opinion." 155 F.R.D. at 452. Defendant was required to "contact all entities to which it has distributed videocassettes and the previous mailings to determine their current inventory of the Lawnmower Man and whether the entities have received adequate corrective stickers to comply with the Decree" and "correct any deficiencies within this thirty day period." Plaintiff was awarded compensatory damages for defendant's noncompliance as well as attorney's fees for prosecuting the contempt.
To comply with the 1994 Order and determine the number of nonconformed copies in the distribution stream, defendant retained a mass mailing service to effectuate the distribution of an inventory report form to 25,334 video retailers and 226 video wholesalers and distributors (the "third mailing"), which would be filled out and returned to defendant. 877 F. Supp. at 187. After return of the completed form, defendant planned to have the service distribute the appropriate number of corrective sleeves or stickers to each responding entity (the "fourth mailing"). Id . Regretfully, a minority of the retailers, wholesalers and distributors responded. Id. at 188. Defendant sent the fourth mailing only to the responding entities, ignoring the fact that a vast majority of the retailers, wholesalers and distributors had not responded and thus would not receive an amount of corrective packaging corresponding to their inventory. Id. Under the 1994 Order, plaintiff was permitted to conduct a compliance investigation, which revealed that a majority of the videocassette packages in the distribution stream observed still bore the banned references to plaintiff. Id. at 189.
Accordingly, plaintiff moved again for contempt before this court and defendant was found in violation of both the Decree and the 1994 Order. The court ordered defendant to use certified mail to contact those entities that had not responded to the third mailing to determine if they had sufficient corrective packaging. If correspondence by certified mail did not elicit a response, defendant was directed to contact them by phone. Id. at 191.
Defendant appealed both the 1994 and 1995 Orders. Upon review, the Court of Appeals affirmed substantial portions of the 1994 Order but determined that certain elements of the 1994 Order were overreaching in that they imposed obligations on defendant that exceeded the terms of the original agreement between the parties and thus could not serve as the basis for the sanction of contempt. 65 F.3d at 1060-61. Because the 1995 Order was based on defendant's failure to comply with those portions of the 1994 Order the Court of Appeals considered overbroad, the 1995 Order was vacated in its entirety.
The Court of Appeals remanded the proceedings to this court.
On December 5, 1995, while the parties were trying to resolve any outstanding disputes between them, the court held a conference with counsel for the parties and directed each to submit proposed findings of fact and conclusions of law on the issue of ...