7/26/2019 Bose Corporation v. Ejaz, 1st Cir. (2013) http://slidepdf.com/reader/full/bose-corporation-v-ejaz-1st-cir-2013 1/23 United States Court of Appeals For the First Circuit No. 12- 2403 BOSE CORPORATION, Pl ai nt i f f , Appel l ee, v. SALMAN EJ AZ, Def endant , Appel l ant . APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [ Hon. Deni se J . Casper , U. S. Di st r i ct J udge] Bef or e Lynch, Chi ef J udge, Torr uel l a and Kayatt a, Ci r cui t J udges. Em i l y E. Sm i t h- Lee, wi t h whom Sana Abdul l ah and Sm i t h Lee Nebenzahl LLP wer e on br i ef , f or appel l ant . J ef f r ey S. Pat t er s on, wi t h whom Chri st opher S. Fi nner t y, Morgan T. Ni ckerson, and Nel son Mul l i ns Ri l ey & Scarborough LLP wer e on br i ef , f or appel l ee. Oct ober 4, 2013
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7/26/2019 Bose Corporation v. Ejaz, 1st Cir. (2013)
United States Court of AppealsFor the First Circuit
No. 12- 2403
BOSE CORPORATI ON,
Pl ai nt i f f , Appel l ee,
v.
SALMAN EJ AZ,
Def endant , Appel l ant .
APPEAL FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF MASSACHUSETTS
[ Hon. Deni se J . Casper , U. S. Di st r i ct J udge]
Bef or e
Lynch, Chi ef J udge, Tor r uel l a and Kayat t a, Ci r cui t J udges.
Emi l y E. Smi t h- Lee, wi t h whom Sana Abdul l ah and Smi t h LeeNebenzahl LLP wer e on br i ef , f or appel l ant .
J ef f r ey S. Pat t er son, wi t h whom Chr i st opher S. Fi nner t y,Morgan T. Ni cker son, and Nel son Mul l i ns Ri l ey & Scarborough LLPwer e on br i ef , f or appel l ee.
Oct ober 4, 2013
7/26/2019 Bose Corporation v. Ejaz, 1st Cir. (2013)
Ej az f r om sel l i ng Bose pr oduct s anywher e i n t he wor l d wi t hout
Bose' s pr i or consent . I t f ur t her pr ovi ded t hat Ej az woul d owe Bose
$50, 000 i n l i qui dat ed damages f or ever y vi ol at i on of t he Set t l ement
Agr eement . Ej az si gned t he Set t l ement Agr eement on J anuary 27,
2007. Bose si gned i t on Febr uar y 26, 2007, and i t t ook ef f ect on
t hat date. Second, t he Set t l ement Agr eement i ncl uded a Consent
Or der , t o be f i l ed i n t he Br i t i sh Hi gh Cour t of J ust i ce. The
Consent Or der was f i l ed wi t h that cour t on Febr uary 23, 2007, and
i ssued by t hat court on March 9, 2007. The Consent Or der
t er mi nat ed t he U. K. l awsui t i n exchange f or Ej az' s pr omi se t o st op
sel l i ng Bose pr oduct s i n t he Eur opean Uni on.
Not l ong af t er execut i ng t he Set t l ement Agr eement , Ej az
vi ol at ed i t . As he wr ot e i n an emai l , "gr eed got [ t he] bet t er of
[ hi m] , " and he st ar t ed sel l i ng Bose pr oduct s i n Aust r al i a. I n
r esponse, Bose i ni t i ated t he pr esent case. Bose sought damages
agai nst Ej az f or br each of t he Set t l ement Agr eement on seven
occasi ons. 1 I t al so added f ur t her cl ai ms, of whi ch onl y i t s cl ai m
f or t r ademar k i nf r i ngement i s r el evant her e.
Af t er di scovery, Bose moved f or summary j udgment . Ej az
opposed the mot i on, cl ai mi ng that t here were a number of di sput ed
mat er i al f act s rel at i ng t o sever al cont r act def enses. He f ur t her
1 By hi s own admi ssi on, Ej az sol d at l east seven uni t s i nAust r al i a. For pur poses of t hi s case, Bose has deci ded t o r el y ont hat admi ssi on and seek recover y f or seven vi ol at i ons of t heSet t l ement Agr eement r at her t han t r y t o pr ove a pot ent i al l y muchgr eat er number of sal es.
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t he bur den of pr oof on Ej az. See E. H. Ashl ey & Co. , I nc. v. Wel l s
Far go Al ar m Ser vs. , 907 F. 2d 1274, 1278 ( 1st Ci r . 1990) . Under
Massachuset t s l aw, unconsci onabi l i t y r equi r es a " t wo- par t i nqui r y, "
i n whi ch the def endant must pr ove both "pr ocedur al " and
"subst ant i ve" unconsci onabi l i t y. Tr ans- Spec Tr uck Ser v. , I nc. v.
Cat er pi l l ar I nc. , 524 F. 3d 315, 329 ( 1st Ci r . 2008) ( quot i ng
Zapat ha v. Dai r y Mar t , I nc. , 408 N. E. 2d 1370, 1377 n. 13 ( Mass.
1980) ) ( i nt er nal quot at i on mar ks omi t t ed) .
The evi dence does not show subst ant i ve unconsci onabi l i t y
as t o t he maki ng of t he cont r act her e. We di scuss l at er t he
di scr et e i ssue of t he l i qui dat ed damages cl ause. Cont r act s ar e
subst ant i vel y unconsci onabl e i f t hey show a "gr oss di spar i t y" i n
consi der at i on t hat makes themf aci al l y unf ai r . E. g. Wat er s v. Mi n
Lt d. , 587 N. E. 2d 231, 234 ( Mass. 1992) ( f i ndi ng "gr oss di spar i t y"
where annui t y wi t h $189, 000 i mmedi ate cash val ue was sol d f or
$50, 000, and ci t i ng as unconsci onabl e anot her case i n whi ch a t r ust
i nt er est wor t h $1, 100, 000 was sol d f or $66, 000) . The r ecor d i n
t hi s case shows t hat , at t he t i me he si gned t he agr eement , Ej az
under st ood t hat he woul d be r el i eved of l egal l i abi l i t y that coul d
have r eached $250, 000 i n t he U. K. l i t i gat i on al one. 3 Because t he
3 The r ecor d i s uncl ear as t o whet her t he $250, 000 f i gur er ef er s speci f i cal l y t o t he U. K. l i t i gat i on, whi ch was addr essed i nt he Consent Or der . But t hat di st i nct i on i s i mmat er i al , because t heSet t l ement Agr eement set t l ed al l cl ai ms, i ncl udi ng t hose cover ed byt he Consent Or der , and i ncor por at ed t he Consent Or der wi t hi n i t st erms.
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f i nanci al benef i t f or hi m was at l east a quar t er of a mi l l i on
dol l ar s i n l i abi l i t y avoi ded, no r easonabl e f act f i nder coul d
concl ude t hat Ej az has met hi s bur den of pr oof i n hi s at t empt t o
est abl i sh unconsci onabi l i t y.
4. Dur ess
Dur ess i s an af f i r mat i ve def ense f or whi ch Ej az must
pr ove t hr ee el ement s: " ( 1) he has been t he vi ct i mof some unl awf ul
or wr ongf ul act or t hr eat ; ( 2) t he act or t hr eat depr i ved hi m of
hi s f r ee or unf et t er ed wi l l ; and ( 3) due t o t he f i r st t wo f actor s,
he was compel l ed t o make a di sproport i onate exchange of val ues. "
Happ v. Cor ni ng, I nc. , 466 F. 3d 41, 44 ( 1st Ci r . 2006) . Ej az
cont ends t hat Bose act ed wr ongf ul l y by pr essur i ng and i nt i mi dat i ng
hi m usi ng what he says he per cei ved as t hr eat s of j ai l t i me, and
t hat Bose' s at t or neys vi ol at ed t he Massachuset t s Rul es of
Prof essi onal Conduct by advi si ng hi m, as an unr epr esent ed par t y, t o
si gn t he Set t l ement Agr eement . These act i ons, he cl ai ms,
const i t ut ed dur ess.
Ej az mi schar act er i zes t he f act s of t hi s case. Bose' s
l awyer s appr oached hi m, a savvy i nt ernet busi nessman wi t h t otal
annual eBay sal es near $75, 000 and gr owi ng qui ckl y, 4 t o of f er a
set t l ement agr eement t o avoi d a l awsui t . Those l awyer s, accor di ng
t o Ej az, t ol d hi m t hat t her e coul d be "r eper cussi ons" t o hi s
4 Ej az' s sal es t he pr evi ous year , 2005, wer e no hi gher t han$50, 000; by 2010, hi s f i nanci al r ecor ds showed sal es exceedi ng t womi l l i on Br i t i sh pounds annual l y.
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r et ur ned i t . As l ong as t he opt i on t o r ej ect t he cont r act
r emai ned, Ej az di d not act under dur ess. I smer t & Assocs. , I nc. v.
New Eng. Mut . Li f e I ns. Co. , 801 F. 2d 536, 549- 50 ( 1st Ci r . 1986)
( not i ng t hat t he opt i on t o r ef use t o si gn a r el ease and t o l i t i gat e
i nst ead woul d def eat a cl ai m f or dur ess, and obser vi ng t hat "a
st r i ct i nt er pr et at i on" of t he concept of "no r eal choi ce" i s "what
t he Massachuset t s cour t s i nt end" as a pol i cy mat t er ) .
B. Enf or ceabi l i t y of Li qui dat ed Damages Cl ause
Apar t f r omt he val i di t y of t he ent i r e cont r act , Ej az al so
chal l enges t he Set t l ement Agr eement ' s l i qui dat ed damages cl ause i n
par t i cul ar . He ar gues t hat i t i s unenf or ceabl e because i t i s not
r easonabl y pr opor t i onal t o Bose' s ant i ci pat ed damages and
di f f i cul t i es of pr ovi ng l oss at t he t i me t he Set t l ement Agr eement
was execut ed. 5 Thi s i s a cl oser quest i on.
5 Ej az al so makes t wo ot her ar gument s, but bot h ar e easi l yr ej ect ed. Fi r st , he cl ai ms t hat t her e i s a di sput e over whet hert he par t i es i nt ended t he cl ause t o serve as l i qui dat ed damages oras a penal t y - - a genui ne di sput e of mat er i al f act t hat pr event s agrant of summar y j udgment . That argument i s si mpl y wr ong. Whet hera cl ause i mposes enf orceabl e l i qui dated damages or an unenf orceabl epenal t y i s a quest i on of l aw. NPS, LLC v. Mi ni hane, 886 N. E. 2d670, 673 ( Mass. 2008) . Even i f t he cl ause' s ef f ect wer e a quest i onof f act , Ej az poi nt s t o no r ecor d evi dence i ndi cat i ng t hat he
bel i eved at t he t i me of cont r act i ng t hat t he cl ause was i nt ended t obe a penal t y. Second, Ej az cl ai ms t hat t he cl ause i s unenf or ceabl ebecause i t i s di spr opor t i onat e to the damages Bose act ual l ysuf f er ed. But t hi s ar gument cannot squar e wi t h Kel l y v. Mar x, 705N. E. 2d 1114 ( Mass. 1999) , whi ch expl i ci t l y st at ed t hat t he damagesact ual l y suf f er ed have no bear i ng on t he enf or ceabi l i t y of al i qui dat ed damages cl ause. See i d. at 1117.
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avoi d l i qui dated damages cl ause even t hough cl ause pr ovi ded f or
per - vi ol at i on damages wi t hout l i mi t ) . 6
The Rest at ement al so adopts t hi s posi t i on, anal yzi ng
l i qui dat ed damages as t hey ar e act ual l y i mposed r at her t han i n
hypot het i cal s. See Rest at ement ( 2d) of Cont r act s § 356 cmt . b,
i l l us. 3 ( cont empl at i ng val i d enf or cement of l i qui dat ed damages
cl ause pr ovi di ng f or per - day l at e f ees even though f ees wer e
unl i mi t ed, wher e t en days of f ees are sought ) .
Bose ar t i cul at ed a ser i es of har ms showi ng t hat t he
l i qui dat ed damages cl ause i s r easonabl e i n t hi s case.
6 Cour t s i n ot her j ur i sdi ct i ons have f ol l owed t he sameappr oach. See, e. g. , Pr oTher apy Assocs. , LLC v. AFS of Bast i an,I nc. , 782 F. Supp. 2d 206, 218- 19 ( W. D. Va. 2011) ( al l owi ngenf orcement of l i qui dated damages pr ovi si on gr ant i ng uncappeddamages of $10, 000 per br each acr oss f i f t y- seven br eaches) ; El excoLand Servs. , I nc. v. Henni g, No. 11- CV- 00214, 2011 WL 9368970, at*6 ( W. D. N. Y. Dec. 28, 2011) ( r eservi ng deci si on of whet her
l i qui dated damages cl ause pr ovi di ng $25, 000 per br each i senf or ceabl e unt i l pl ai nt i f f act ual l y sought damages under t hecl ause) ; Mat t i ngl y Br i dge Co. v. Hol l oway & Son Const r . Co. , 694S. W. 2d 702, 704 ( Ky. 1985) ( al l owi ng enf orcement of l i qui dat eddamages provi si on gr ant i ng $750 damages per day l ate wi t hout l i mi tbut r educi ng r ecover y f r om unr easonabl e 193- day penal t y t or easonabl e 32 and 2/ 3- day damages) ; Bd. of Cnty. Comm' r s of AdamsCnt y. v. Ci t y & Cnt y. of Denver , 40 P. 3d 25, 32 ( Col o. App. 2001)( " I f a cont r act st i pul at es a si ngl e l i qui dat ed damage amount f orsever al possi bl e br eaches, t he damage pr ovi si on i s i nval i d as apenal t y i f i t i s unr easonabl y di spr opor t i onat e t o t he expect ed l osson t he very br each that di d occur and was sued upon. " ) ; Anonymous
v. Anonymous, 649 N. Y. S. 2d 665, 666- 67 ( N. Y. App. Di v. 1996)( l i qui dat ed damages pr ovi si on al l owi ng $500, 000 per br each of conf i dent i al i t y agr eement not , "i n and of i t sel f , " unenf or ceabl e asagai nst publ i c pol i cy) ; cf . Rex Tr ai l er Co. v. Uni t ed St at es, 350U. S. 148, 151- 152 ( 1956) ( uncapped st atut ory penal t y of $2000 pervi ol at i on enf or ceabl e as l i qui dat ed damages r at her t han cr i mi nalsancti on f or case of f i ve vi ol at i ons) .
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cl ai m. A pl ai nt i f f al l egi ng t r ademar k i nf r i ngement must pr ove t wo
el ement s: ( 1) t he t r ademar ks ar e "ent i t l ed t o t r ademar k
pr ot ecti on, " and ( 2) "t he al l egedl y i nf r i ngi ng use i s l i kel y t o
cause consumer conf usi on. " Bos. Duck Tour s, LP v. Super Duck
Tour s, LLC, 531 F. 3d 1, 12 ( 1st Ci r . 2008) . 7
Ther e i s no di sput e over t he f i r st el ement i n t hi s case.
Bose' s t r ademar ks ar e r egi st er ed on t he Pr i nci pal Regi st er of t he
Uni t ed St at es Pat ent and Tr ademar k Of f i ce. Regi st r at i on serves as
pr i ma f aci e evi dence t hat t he t r ademar ks ar e ent i t l ed t o
pr ot ect i on, see 15 U. S. C. § 1057( b) , and Ej az has not cont est ed
t hat evi dence.
On t he consumer conf usi on el ement , Ej az ar gues t hat t here
was a genui ne di sput e of mater i al f act over whet her hi s sal es of
Bose pr oduct s wer e l i kel y t o cause consumer conf usi on f or t wo
r easons: any di f f er ences bet ween t he pr oduct s sui t abl e f or use i n
par t i cul ar count r i es wer e t r i vi al , and hi s cust omer s on eBay woul d
have been aware of any di f f erences bef ore maki ng thei r pur chases of
pr oduct s meant f or use i n ot her count r i es. I n a gr ay mar ket goods
7 Bose st at ed cl ai ms under bot h f eder al st at ut or y l aw andst ate common l aw but di d not i dent i f y whi ch st ate' s common l awwoul d gover n. Regar dl ess, t he anal ysi s her e may be col l apsed i nt o
t he f ederal cl ai mst r uct ur e because t he common l aw t r ademark cl ai msi n both Massachuset t s and New J ersey - - Ej az' s home st ate and t heonl y ot her pl ausi bl e candi dat e f or t he choi ce of l aw her e - - bot hr equi r e t he same el ement s as t he f eder al cl ai m. See J enzabar , I nc.v. Long Bow Gr p. , I nc. , 977 N. E. 2d 75, 82 n. 11 ( Mass. App. Ct .2012) ; Bar r e- Nat ' l , I nc. v. Bar r Labs. , I nc. , 773 F. Supp. 735, 746( D. N. J . 1991) .
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case, "a mat er i al di f f er ence bet ween goods si mul t aneousl y sol d i n
t he same mar ket under t he same name cr eat es a pr esumpt i on of
consumer conf usi on as a mat t er of l aw. " Soci et e Des Pr odui t s
Nest l e, S. A. , 982 F. 2d at 640. Rel yi ng on t hi s pr esumpt i on, Bose
poi nt s t o sever al mat er i al di f f er ences bet ween i t s Aust r al i an
pr oduct s and t he Amer i can pr oduct s t hat Ej az sol d i n Aust r al i a.
Those di f f er ences i ncl ude r egi on codi ng, whi ch wi l l keep an
Amer i can DVD pl ayer f r om pl ayi ng Aust r al i an DVDs and vi ce ver sa;
el ect r i cal power r equi r ement s, whi ch pr event Amer i can el ect r oni cs
f r om f unct i oni ng on Aust r al i an power suppl i es and vi ce ver sa;
capabi l i t i es of t he r emot e cont r ol s; dur at i ons of t he pr oduct s'
war r ant i es; and t he desi gn and f unct i onal i t y of t he pr oduct s' r adi o
t uner s. 8 Evi dence i n t he r ecor d, such as Bose' s cor por at e
8 Ej az i ni t i al l y cont ended t hat evi dence of t hese di f f er enceswas not pr oper l y bef ore t he di st r i ct cour t on summary j udgment
because st at ement s f r om Bose' s cor por at e repr esent at i ve not madebased on per sonal knowl edge woul d not have been admi ssi bl e att r i al . See, e. g. , Novi el l o v. Ci t y of Bost on, 398 F. 3d 76, 84 ( 1stCi r . 2005) ; Fed. R. Ci v. P. 56( c) ( 2) ( "A par t y may obj ect t hat t hemat er i al ci t ed t o suppor t or di sput e a f act cannot be pr esent ed i na f or mt hat woul d be admi ssi bl e i n evi dence. ") . Speci f i cal l y, Ej azar gued t hat Bose' s onl y evi dence on t hi s poi nt came f r om i t s Fed.R. Ci v. P. 30( b) ( 6) cor por at e r epr esent at i ve; whi l e an opposi ngpar t y may or di nar i l y of f er t he cor por at e r epr esent at i ve' s t est i monyas a st at ement of a par t y- opponent , see Fed. R. Evi d. 801( d) ( 2) ,Ej az has argued i ncor r ect l y t hat Bose had pr esent ed no basi s f ormaki ng t he t est i mony of i t s own r epr esent at i ve admi ss i bl e, because
he was t est i f yi ng t o mat t er s out si de hi s per sonal knowl edge.However , t he evi dence shows t hat Bose' s r epr esent at i ve t est i f i ed onhi s per sonal knowl edge about di f f er ences i n t echni calspeci f i cat i ons and war r ant i es f or di f f er ent pr oduct s. Fur t her ,t her e was ot her r ecor d evi dence, such as Ej az' s own admi ssi ons,t hat at l east one of t he di f f er ences Bose i dent i f i ed - - t he vol t ager equi r ement s - - was i n f act a mat er i al di f f er ence.
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obt ai n i nf or mat i on i n t he case by pr ovi di ng an i nsuf f i ci ent l y
pr epar ed r epr esent at i ve. The di st r i ct cour t di d not addr ess t he
mot i on t o reopen di scovery and i nst ead rul ed on t he summary
j udgment mot i on. Ej az ar gues t hat t he cour t er r ed i n doi ng so.
We r evi ew a di st r i ct cour t ' s r ef usal t o r eopen di scover y
f or abuse of di scr et i on. Vi neber g v. Bi ssonnet t e, 548 F. 3d 50, 55
( 1st Ci r . 2008) . The same st andar d of r evi ew appl i es to t he
deci si on t o pr oceed wi t h a summary j udgment mot i on whi l e a
di scover y r equest r emai ns out st andi ng. See Ni eves- Romer o v. Uni t ed
St at es, 715 F. 3d 375, 380 ( 1st Ci r . 2013) .
Her e, t he di st r i ct cour t was wel l wi t hi n i t s di scr et i on
i n r ul i ng on t he summary j udgment mot i on f i r st . A Rul e 56( d)
mot i on r equi r es i t s pr oponent t o show vi a "an af f i davi t or ot her
aut hor i t at i ve document " :
( i ) good cause f or hi s i nabi l i t y t o havedi scover ed or mar shal l ed t he necessar y f act sear l i er i n t he pr oceedi ngs; ( i i ) a pl ausi bl ebasi s f or bel i evi ng t hat addi t i onal f actspr obabl y exi st and can be r et r i eved wi t hi n ar easonabl e t i me; and ( i i i ) an expl anat i on of how t hose f act s, i f col l ect ed, wi l l suf f i ce t odef eat t he pendi ng summar y j udgment mot i on.
Ri ver a- Tor r es v. Rey- Her nandez, 502 F. 3d 7, 10 ( 1st Ci r . 2007) . I n
t hi s case, Ej az made no showi ng i n suppor t of t he thi r d r equi r ement
f or a 56( d) mot i on - - namel y, how any addi t i onal f act s he col l ect ed
woul d def eat t he pendi ng summary j udgment mot i on. I ndeed, Ej az
even suggest ed t hat no addi t i onal f act s wer e needed, not i ng i n hi s
br i ef opposi ng the mot i on f or summary j udgment t hat "Def endant
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