Petition for Writ of Certiorari — Rosati v. Cottman Transmission Systems, Inc.

Supreme Court, U.S

fo FILED

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\/ 961118 JAN 1 41997,

gasmme OF THE CLERK

In The

Supreme Court of the United States

+

October Term, 1996

A.D. ROSATI,

Petitioner In Pro Per,

VS.

COTTMAN TRANSMISSION SYSTEMS, INC.,

Respondent.

Petition for a Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

PETITION FOR A WRIT OF CERTIORARI

A.D. ROSATI

Petitioner In Pro Per

7115 Orchard Lake Road

Suite 140

West Bloomfield, Michigan 48322

(810) 737-4884

9972

utz

(800) 3 APPEAL « (800) 5 APPEAL » (800) BRIEF 21 L te

EL, IIOP: OPI LO OT

i

QUESTIONS PRESENTED

1. Must a nonparty file an appeal from a 28 U.S.C:S.

§ 1292(a)(1) interlocutory order within 30 days of its entry to

vest a Court of Appeals with jurisdiction to hear an appeal of

that order?

2. Is an award of attorney fees in a civil contempt

proceeding in an amount 20 times the actual damages suffered

by a party a per se unreasonable award?

li

LIST OF PARTIES

Petitioner A.D. Rosati is a nonparty and the Respondent is

the plaintiff in the proceedings in the court whose judgment is

sought to be reviewed here. The named Defendants in the lower

court proceedings are not parties to this Petition. On Petitioner’s

best information and belief, there is no parent or subsidiary of

Respondent to be listed.

iii

TABLE OF CONTENTS

Page

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Reasons for Granting the Writ ................0200. 4

I. The Third Circuit Court Of Appeals Erred In

Declining To Determine Rosati’s Appeal Of The

June 28, 1995 District Court Order Denying His

Motion To Vacate The July 17, 1992 Preliminary

Injunction On The Apparent Belief That It Lacked

Jurisdiction To Do So Because An Appeal Of That

Order Was Not Filed Within 30 Days Of Its Entry

SON UREN mn Panny eae a a 5

II. The District Court Erred In Awarding Attorney

Fees In A Civil Contempt Proceeding In An

Amount Twenty Times The Amount Of The Actual

Loss Suffered By Cottman ...............4.. 12

ie aN alg a idee wae 17

iv

Contents

Page

TABLE OF CITATIONS

Cases Cited:

Balla v. Idaho State Bd. of Corrections, 869 F.2d 461

PRs SUT ck cna beeeunae whe eeelbasCaures 4,8

Carson v. American Brands, Inc., 450 U.S. 79, 101 S.

Ct. Fs, GF bn Seer a ae LEED Ske canccavecnnenen 4,10

City of Riverside v. Rivera, 477 U.S. 561, 106 S. Ct. 2686,

ee ek eee rar erin 5, 15, 16

Fleischmann Distill. Corp. v. Maier Brewing Cottman,

386 U.S. 714, 87 S. Ct. 1404, 18 L. Ed. 2d 475 (1967)

Se re TE me aH hE per anes em RGU 13

Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76

Soc Ss SE RE EE awh Ace ox ee ck es Ook 14

Retired Chicago Police Ass ’n v. City of Chicago, 7 F.3d

Pee SPE: FOE od oer hone cancun kehea ban ekaka 4,8

Sierra Club v. Robertson, 28 F.3d 753 (8th Cir. 1994)

49a HUES eS wh Ede Ons A er ee bk eae 4,7

Toledo Scale Cottman v. Computing Scale Cottman, 261

U.S. 399, 43 S. Ct. 458, 67 L. Ed. 719 (1923) ...... 13

United States v. Ryan, 402 U.S. 530, 91 S. Ct. 1580, 29

Lins SEE AEST ED. Sc ke keg ence a ecKniseesaal 6,7

Contents

Page

United States v. United Mine Workers of America, 330

U.S. 258, 67 S. Ct. 677, 91 L. Ed. 884 (1947) ...... 12

U.S. Catholic Conference v. Abortion Rights, 487 U.S.

12, 108 S. Ct. 2268, 101 L. Ed. 2d 69 (1988) ...... 6

Statues Cited:

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Be Meee SD: oh os 5 RS eA eh eae waeeees 7

Sy State SE as bso e ks cask naewavurese vere 4

Be tes SED 2. kk 5 6 ARASR EA Pe HRGA ONS R455 i, 1,4

Rules Cited:

Federal Rules of Civil Procedure:

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ES u's 2's 6 eGo A RARE ROTOR ERE 1]

SU NEIRD ice vse Che OS ko ae bo bk a eas BO beewend 11

vi

Contents

APPENDIX

Appendix A — Sur Petition for Rehearing of the United

States Court of Appeals for the Third Circuit Dated

GEE A, BEE: ab Ve pid Ursvvctnedubpescbseees

Appendix B — Judgment Order of the United States Court

of Appeals for the Third Circuit Dated September 23,

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Appendix C — Order of the United States District Court

for the Eastern District of Pennsylvania Dated February

Ti 6h aad been de denne kcknes hates

Appendix D — Memorandum of the United States District

Court for the Eastern District of Pennsylvania Entered

PE Me BOE heh tadnned cpbewsensWaeennees

Appendix E — Order of the United States District Court

for the Eastern District of Pennsylvania Filed June 28,

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1

OPINIONS BELOW

The unreported September 23, 1996 opinion of the Court

of Appeals affirming the district court’s Order of February 2,

1996 and its unreported October 16, 1996 opinion denying the

petition for rehearing is reproduced in the Appendix, infra at 8a

and la. The unreported opinions of the district court are

reproduced at 11a and 23a.

STATEMENT OF JURISDICTION

The Court of Appeals entered its Judgment Order on

September 23, 1996 and its Order denying rehearing on October

16, 1996. The jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1).

STATUTE INVOLVED

The pertinent provision of 28 U.S.C.S. § 1292(a)(1) is set

forth below:

§ 1292. Interlocutory decisions

(a) Except as provided in subsections (c) and

(d) of this section, the courts of appeals shall

have jurisdiction of appeals from:

(1) Interlocutory orders of the districts

courts of the United States ... granting,

continuing, modifying, refusing or dissolving

injunctions, or refusing to modify

injunctions, except where a direct review may

be had in the Supreme Court;

2

STATEMENT OF THE CASE

Ir, 1991, Cottman Transmission Systems, Inc., a

Pennsylvania corporation (Cottman), was a national franchiser

of transmission repair shops with an insignificant presence in

the State of Michigan. At that time, A-1 Transmissions, Inc., a

Michigan corporation (A-1), had over 30 franchised transmission

repair shops in the State of Michigan. A-1 was in financial straits

and looking for a purchaser of its business and Cottman seized

this opportunity to enter the Michigan market with a significant

presence. To avoid problems with creditors of A-1, the

acquisition technique involved the mutual termination of the

A-1 franchise agreements as of August 25, 1991 and execution

of the Cottman franchise agreements on August 26, 1991.

Included in Cottman’s franchise package was an assignment of

the telephone numbers of the corporate Defendants to Cottman.

This document is Cottman’s justification for seizure of

Defendants’ telephone numbers by enforcement of the

preliminary injunction that issued in this cause.

In signing the former A-1 franchisees to its franchise

agreements, Cottman violated the Michigan Franchise

Investment Law. This violation afforded the former A-1

franchisees the right to rescind the Cottman franchise

agreements and the Defendants rescinded effective April 8, 1992.

Cottman filed the within actions in the United States District

Court for the Eastern District of Pennsylvania (federal action)

shortly thereafter and sought a preliminary injunction primarily

directed to removing the assigned telephone numbers from

Defendants’ shops and transferring them to other Cottman

franchisees. At all relevant times, Defendants were represented

by Pennsylvania counsel in the federal action.

In June of 1992, Rosati filed an action in the Circuit Court

for the County of Wayne, State of Michigan (state action) on

3

behalf of Defendants against Cottman and Michigan Bell

Telephone Company. The relief sought against Michigan Bell

was preservation of Defendants’ telephone numbers. On July

17, 1992, Cottman secured a preliminary injunction in the federal

action. On July 20, 1992, Rosati called Michigan Bell’s counsel

in the state action to discuss the applicability of the preliminary

injunction to the State Action. On July 23, 1992, Rosati learned

that Michigan Bell had disconnected Defendants’ telephone

numbers and was transferring them to other Cottmaa franchisees.

On August 5, 1992, Cottman filed a Motion for Civil Contempt

against the Defendants and Rosati alleging a violation of the

preliminary injunction by acts impeding Cottman’s taking of

Defendants’ telephone numbers. The federal action concluded

on December 22, 1993 with Cottman abandoning its contempt

claim against all of the Defendants but preserving its contempt

Claim against Rosati.

Following a number of adjournments, the contempt hearing

was scheduled for June 28, 1995. On May 17, 1995, Rosati filed

a Motion to Vacate the Preliminary Injunction. On June 28, 1995,

Rosati appeared in the district court for the contempt hearing

and was personally served with a copy of the June 28, 1995

Order denying his motion to vacate the preliminary injunction.

The June 28, 1995 hearing consumed approximately three

hours. Cottman and Rosati filed proposed findings of facts and

conclusions of law and the district court issued its opinion and

order on February 2, 1996 finding Rosati in contempt and

awarding Cottman damages of $1,358, attorney fees of $9,907.50

and expenses of $494.

On February 23, 1996, Rosati filed his Notice of Appeal

from the June 28, 1995 Order denying his motion to vacate the

preliminary injunction and the February 2, 1966 Order granting

Cottman’s motion for civil contempt and awarding Cottman

4

damages, costs and attorney fees. During oral argument in the

Third Circuit Court of Appeals, the panel indicated their belief

that it lacked jurisdiction to rule on the June 28, 1995 order. On

September 23, 1996, the Third Circuit Court of Appeals entered

an Order Affirming the district court’s judgment of February 2,

1996. On October 4, 1996, Rosati filed a Petition for Rehearing

by the Third Circuit Court of Appeals requestin,, inter alia, a

ruling as to the June 28, 1995 order. On October 16, 1996,

Rosati’s petition for rehearing was denied.

REASONS FOR GRANTING THE WRIT

The Third Circuit Court of Appeals’ holding that a nonparty

must file an immediate appeal of a 28 U.S.C.S. § 1292(a)(1)

interlocutory order to vest it with jurisdiction is in conflict with

decisions of three other circuits, Sierra Club v. Robertson, 28

F.3d 753, 756, n. 3 (8th Cir. 1994); Balla v. Idaho State Bd. of

Corrections, 869 F.2d 461, 468 (9th Cir. 1989); and Retired

Chicago Police Ass'n v. City of Chicago, 7 F.3d 584, 680 (7th

Cir. 1993). In addition this holding is contrary to this Court’s

decision in Carson v. American Brands, Inc., 450 U.S. 79, 85,

101 S. Ct. 993, 997, 67 L. Ed. 2d 59 (1981), which precludes an

interlocutory appeal unless the interlocutory order might have

a serious, perhaps irreparable consequence and can be effectually

challenged only by an immediate appeal. In the case at bar, one

telephone call on July 20, 1992 was the only and final

contemptuous act of Rosati and the parameters of an action for

civil contempt were crystallized. The June 28, 1995 order

denying Rosati’s motion to vacate the July 17, 1992 Preliminary

Injunction clearly could be effectively challenged, consistent

with judicial economy, at the time of appealing the final order

of February 2, 1996.

This case fairly presents the issue of whether an award of

attorney fees disproportionate to the award of damages in a civil

5

proceeding is unreasonable per se. This Court addressed this

issue in City of Riverside v. Rivera, 477 U.S. 561, 575, 106 S.

Ct. 2686, 2694, 91 L. Ed. 2d 466 (1986) where the majority

upheld an award of attorney fees seven times the amount of

damages on the grounds that a plaintiff in a civil rights action is

also vindicating important civil and constitutional rights that

cannot be valued in monetary terms. The within action for

damages for civil contempt invokes no such civil or

constitutional rights and an award of twenty times the amount

of damages is clearly unreasonable. The unreasonableness of

the award of attorney fees is further established by the fact that

for two and one-half years Cottman wrongfully pursued Lanham

Act damages of $24,511 when its actual loss was $496.95.

I.

THE THIRD CIRCUIT COURT OF APPEALS ERRED

IN DECLINING TO DETERMINE ROSATI’S APPEAL OF

THE JUNE 28, 1995 DISTRICT COURT ORDER

DENYING HIS MOTION TO VACATE THE JULY 17, 1992

PRELIMINARY INJUNCTION ON THE APPARENT

BELIEF THAT IT LACKED JURISDICTION TO DO SO

BECAUSE AN APPEAL OF THAT ORDER WAS NOT

FILED WITHIN 30 DAYS OF ITS ENTRY.

It is undisputed that Rosati’s status is that of a nonparty as

he is neither a party, nor attorney of record, in the federal action.

Equally undisputed is the fact that all concerned knew that Rosati

was Defendants’ attorney in the state action and that Michigan

Bell was a party in that action. No one can seriously contend

that a potential nonparty is entitled to notice of the hearing fora

preliminary injunction, the opportunity to participate in the

hearing and present proofs or have a voice in negotiating the

terms of the preliminary injunction. The obvious reason is that

a preliminary injunction hearing would be a nightmare if every

6

officer, agent, servant, employee and attorney of a party was )

deemed to be a necessary participant. While judicial economy

may warrant a preliminary injunction hearing with only parties

participating, judicial economy does not warrant depriving a |

nonparty of the right to contest a preliminary injunction and

assert any defense a party could have asserted.

United States v. Ryan, 402 U.S. 530, 532-533, 91 S. Ct.

1580, 1582, 29 L. Ed. 2d 85 (1971), confirms the right of a

nonparty to utilize a contempt hearing to test the validity of the

order underlying the contempt charge:

We think that respondent’s assertion

misapprehends the thrust of our cases. Of

course, if he complies with the subpoena he

will not thereafter be able to undo the

substantial effort he has exerted to comply.

But compliance is not the only course open

to respondent. If, as he claims, the subpoena

is unduly burdensome or otherwise unlawful,

he may refuse to comply and litigate those

questions in the event that contempt or

similar proceedings are brought against him.

Should his contentions be rejected at that

time by the trial court, they will then be ripe

for appellate review.

U.S. Catholic Conference v. Abortion Rights, 487 U.S. 72,

76, 108 S. Ct. 2268, 2271, 101 L. Ed. 2d 69 (1988), holds that a

nonparty must have the opportunity on the appeal of a civil

contempt order to fully test the power of the court to issue the

order:

The right of a nonparty to appeal an

adjudication of contempt cannot be

7

questioned. The order finding a nonparty

witness in contempt is appealable

notwithstanding the absence of a final

judgment in the underlying action. (citations

omitted) Once the right to appeal a civil

contempt order is acknowledged, arguments

in its legitimate support should not be so

confined that the power of the issuing court

remains untested.

The right of a nonparty to appeal being absolute, the real

question presented is when must a nonparty exercise this right.

The issue involved is the validity of the Preliminary

Injunction as enforced against Rosati. Under the principle

enunciated in United Stated v. Ryan, Rosati can challenge the

validity of the Preliminary Injunction at any time during the

course of the contempt proceedings. Although an order relating

to a Preliminary Injunction is an interlocutory order, 28 U.S.C.S.

§ 1291 (a) grants the right of an appeal from such an order. This

Statute, however, does not make an appeal mandatory. Sierra

Club v. Robertson, 28 F.3d 753, 756, n. 3 (8th Cir. 1994),

discusses the discretionary right insofar as when to appeal:

3. An order denying a preliminary injunction

is immediately appealable as a matter of right

under 28 U.S.C.S. § 1292(a)(1) (1988).

However, the decision to pursue an

immediate appeal is left to the party’s

discretion, and a party may forgo an

interlocutory appeal and instead raise the

issue on appeal after final judgment. Retired

Chicago Police Ass'n v. City of Chicago, 7

F.3d 584, 608 (7th Cir. 1993). There is no

Suggestion that the issues regarding the Oden

8

and Choctaw timber sales have become moot

by reason of supervening events. Thus, the

judgments denying the requests for

preliminary injunctions are properly before

us.

Balla v. Idaho State Bd. of Corrections, 869 F.2d 461, 468

(9th Cir. 1989), holds that an unappealed interlocutory order

merges in the final judgment and can be challenged in an appeal

from the final judgment:

Our opinion does not foreclose litigants from

seeking interlocutory appeals of injunctions

under 28 U.S.C.S. § 1292(a), or permissive

interlocutory appeals under 28 U.S.C:S. :

§ 1292(b). These options can be exercised

before all issues as to all parties have been

resolved. Nor are litigants foreclosed from

seeking appeals from judgments properly

certified under Federal Rule of Civil

Procedure 54(b). But when no such appeal

is taken from an interlocutory order, “the

interlocutory order merges in the final

judgment and may be challenged in an appeal

from that judgment.” Baldwin v. Redwood

City, 540 F.2d 1360, 1364 (9th Cir. 1976)

(footnote omitted), cert denied, 431 US 913,

97 S. Ct 2173, 53 L. Ed. 2d 223 (1977).

Retired Chicago Police Ass'n v. City of Chicago, 7 F.3d 584,

680 (7th Cir. 1993), held that a party may forego an interlocutory

appeal of an order denying a preliminary injunction and present

the issue for appeal after final judgment:

Although an order denying a preliminary

9

injunction is immediately appealable as an

interlocutory decision under 28 U.S.C.

§ 1292(a)(1), an immediate appeal

nonetheless is not mandated by the statute.

A party may forgo an interlocutory appeal

and present the issue for appeal after final

judgment. Interlocutory orders therefore may

be stored up and raised at the end of the case

... Kurowski v. Krajewski, 848 F.2d 767,

772-773 (7th Cir.), cert. denied, 488 U.S.

926, 109 S. Ct. 309, 102 L. Ed. 2d 328(1988).

Consequently, the RCPA has not waived its

right to appeal the denial of its motion for

preliminary injunction.

The Third Circuit Court of Appeals did not determine

Rosati’s appeal of the June 28, 1995 Order of the district court

denying his motion to vacate the July 17, 1992 Preliminary

Injunction. During oral argument, it became evident that the

Third Circuit Court of Appeals believed that it lacked jurisdiction

to hear the appeal of the June 28, 1995 order. Rosati’s suggestion

that this was an interlocutory order drew a rapid, disbelieving

response from a member of the panel. Clearly, the June 28, 1995

order is an interlocutory order by the language of 28 U.S.C.

§ 1292(a), providing in pertinent part for an appeal as follows:

§ 1292. Interlocutory decisions

(a) Except as provided in subsections (c) and

(d) of this section, the courts of appeals shall

have jurisdiction of appeals from:

(1) Interlocutory orders of the districts

courts of the United States ... granting,

continuing, modifying, refusing or dissolving

10

injunctions, or refusing to modify

injunctions, except where a direct review may

be had in the Supreme Court. . . .

As the right to appeal the June 28, 1995 order is expressly

provided for by statute, the obvious explanation for the Third

Circuit Court of Appeals refusal to hear this appeal is its belief

that it lacked jurisdiction. To clarify this issue, Rosati filed a

petition for rehearing in which the court was requested to issue

a written opinion to explain the reason for its inaction. The

petition for rehearing was denied leaving only speculation as to

the reason the Third Circuit Court of Appeals declined to hear

Rosati’s appeal of the June 28, 1995 order.

If this is the Third Circuit Court of Appeals position, it is

contrary to decisions of three other Circuits which support

Rosati’s contention that he timely filed an appeal of the June

28, 1995 order by filing within the time for appealing the final

judgment of February 2, 1996. This position is also contrary to

the holding of Carson v. American Brands, Inc., 450 U.S. 79,

85, 101 S. Ct. 993, 997, 67 L. Ed. 2d 59 (1981):

Unless a litigant can show that an

interlocutory order of the district court might

have a serious, perhaps irreparable

consequence, and that the order can be

effectually challenged only by immediate

appeal, the general congressional policy

against piecemeal review will preclude

interlocutory appeal.

The order denying Rosati’s motion to vacate the Preliminary

Injunction issued on June 28, 1995, the hearing date for

Cottman’s contempt motion. If the district court found no

contempt on the part of Rosati, or no damages, the issue of an

1]

appeal of the June 28, 1995 order would be moot. Clearly, there

was no need for an immediate appeal and Rosati properly waited

for final judgment to determine whether an appeal was necessary.

And finally, the refusal to hear the appeal of the June 28, 1995

order cannot be condoned under the concept of harmless error.

The thrust of Rosati’s motion to vacate the July 17, 1992

Preliminary Injunction was that the district court abused its

discretion in granting injunctive relief by failing to:

(a) make the findings of facts and conclusions of law

required by Federal Rule of Civil Procedure 52(a);

(b) set forth in the injunction the reasons for its

issuance as required by Federal Rule of Civil Procedure

65(d);

(c) require a showing of immediate and irreparable

injury and a reasonable probability of eventual success;

(d) abstain from the inferential determination of the

disputed issue of fact as to ownership of the telephone

numbers in question;

(e€) recognize that Appellee’s action was one for

damages in the amount of unpaid franchise fees for which

there was an adequate remedy at law;

(f) apply the doctrine of balancing of conveniences

in that to insure Cottman’s receipt of its franchise fees of 7

1/2% of Defendants’ sales it deprived Defendants of the

remaining 92 1/2% of the sales;

(g) maintain the status quo; and

12

(h) to provide in specific terms and in reasonable detail

the act or acts sought to be restrained, as evidenced by the

fact that one telephone call to opposing counsel in a pending

state action was Appellant’s alleged violation of paragraph

(3) of the preliminary injunction, which provided as

follows:

that defendant’s, acting alone or in concert,

combination, or agreement with others, are:

. .. (3) enjoined from impeding or interfering

with Cottman’s right to use, intercept,

transfer, or otherwise exercise its rights with

respect to the telephone numbers presently

appearing under listings or advertisements

for “A-l/Cottman” and “Cottman” in

telephone directories.

The Third Circuit Court of Appeals erred in declining to

hear Rosati’s appeal of the June 28, 1995 order and this Court

should remand with a directive to that court to hear this appeal.

Il.

THE DISTRICT COURT ERRED IN AWARDING

ATTORNEY FEES INA CIVIL CONTEMPT PROCEEDING

INAN AMOUNT TWENTY TIMES THE AMOUNT OF THE

ACTUAL LOSS SUFFERED BY COTTMAN.

An award of damages as a sanction for civil contempt is

limited by that party’s actual loss. United States v. United Mine

Workers of America, 330 U.S. 258, 304, 67 S. Ct. 677, 701, 91

L. Ed. 884 (1947). The district court found that Rosati impeded

the transfer of the telephone numbers for two days and calculated

Cottman’s damages to be $1,358. This figure was arrived at by

multiplying the sales of the Defendants for the two days in the

a a ee ee ee Ce

13

amount of $6,626 by 742% for unpaid franchise fees of $496.95

and 13% for uncollected advertising fees of $861.05. Cottman

is merely the conduit for passing the advertising fees to the

sources providing advertising services for Defendants. Equitable

principles preclude an agent from diverting to his personal use

funds of his principal given to him to be used for a specific

purpose. As Cottman provided no advertising services to

Defendants subsequent to the April 8, 1992 rescission, Cottman

has no claim for advertising fees subsequent to April 8, 1992.

In short the only actual loss to Cottman is franchise fees of

$496.95. Nevertheless, the district court awarded Cottman

attorney fees of $9,907.50, an amount twenty times the actual

loss of Cottman. The Third Circuit Court of Appeals did not see

fit to address this issue.

In the first instance, the American rule is that attorney fees

are ordinarily not recoverable in the absence of a statute or

enforceable contract providing therefore. Fleischmann Distill.

Corp. v. Maier Brewing Cottman, 386 U.S. 714, 717, 87 S. Ct.

1404, 1407, 18 L. Ed. 2d 475 (1967). Cottman cited no statute

authorizing an award of attorney fees for civil contempt.

However, a judicial exception to the American rule has been

recognized in a civil contempt action. In a civil contempt action

occasioned by willful disobedience of a court order, an award

of attorney fees may be authorized as part of the fine levied on

the defendant. Toledo Scale Cottman v. Computing Scale

Cottman, 261 U.S. 399, 426-428, 43 S. Ct. 458, 465-466, 67 L.

Ed. 719 (1923). The district court held “the Court finds by clear

and convincing evidence that Mr. Rosati disobeyed the Court’s

preliminary injunction order”. This is hardly a finding of willful

disobedience to justify an award of attorney fees for civil

contempt. Assuming arguendo that attorney fees properly lie,

the district court abused its discretion in determining the amount

of fees to be awarded.

ia

This Court has addressed the issue of a reasonable attorney’s

fee in a number of cases involving 28 U.S.C.S. § 1988, which

provides for an award of reasonable attorney fees to the

prevailing party in a civil rights action. The most useful starting

point for determining the amount of a reasonable fee is the

number of hours reasonably expended on the litigation multiplied

by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424,

434, 103 S. Ct. 1933, 1939, 76 L. Ed. 2d 1310 (1983). Hours

that were noi reasonably expended must be excluded from the

fee calculation, id., at 434-435, 103 S. Ct. at 1939. The extent

of a plaintiff’s success is a crucial factor in determining the

amount of fees to be awarded and, where the plaintiff achieved

only limited success, the district court should award only that

amount of fees that is reasonable in relation to the results

obtained, id., at 441, 103 S. Ct. at 1943.

In the case at bar, Cottman, for a period in excess of three

years, pursued a Lanham Act damage claim against Rosati in

the amount of $24,511, consisting of infringing sales by

Defendants for an eight day period — July 17, 1992 to July 25,

1992. This claim is not warranted by existing law and was

rejected by the district court. The district judge elicited the

amount of the franchise and advertising fees from counsel for

Appellee in the hearing and issued its opinion in which it

calculated the actual loss to be $1,358. Under Hensley, the

district court was obligated to exclude the attorney fees expended

on the meritless claim of damages in the amount of the infringing

sales of $24,511 and award attorney fees only in relation to the

damage award of $495.96. It follows that no attorney fees should

be awarded as Cottman never expended legal services to secure

the only allowable damages — franchise fees. In fact, attorney

fees should be awarded to Rosati under Rule 11 as Cottman’s

factual claim of eight days of damages lacked evidentiary

support and its claim for damages based on infringing sales was

not warranted by existing law.

15

It is fairly obvious that the attorney fees are twenty times

the amount of Cottman’s actual loss of $496.95. In a case

involving § 1988, this Court dealt with the question of whether

attorney fees should be proportionate to the amount of damages.

Attorney fees seven times the amount of the damage award was

upheld ir City of Riverside v. Rivera, 477 U.S. 56] , 575, 106 S.

Ct. 2686, 2694, 91 L. Ed. 2d 466 (1986), on the foliowing

rationale:

As an initial matter, we reject the notion that

a civil rights action for damages constitutes

nothing more than a private tort suit

benefiting only the individual plaintiffs

whose rights were violated. Unlike most

private tort litigants, a civil rights plaintiff

seeks to vindicate important civil and

constitutional rights that cannot be valued in

monetary terms. (Citation omitted) And,

Congress hus determined that “the public as

a whole has an interest in the vindication of

the rights conferred by the statutes

enumerated in § 1988, over and above the

value of a civil rights remedy to a particular

plaintiff ...”

Chief Justice Burger in dissent opined:

I write only to add that it would be difficult

to find a better example of legal nonsense

than the fixing of attorney’s fees by a judge

at $245,456.25 for the recovery of

$33,350.00.

Id., at 588, 106 S Ct. at 2700. It is respectfully suggested that

the case at bar is the better example of legal nonsense in fixing

attorney fees.

16

The case at bar in the final analysis seeks contract damages,

measured by the amount of franchise and advertising fees

required to be paid by defendants under the terms of their

franchise agreement with Cottman. Cottman knew on July 23,

1992 that it was only entitled to damages in the amount of these

fees for a two day period and, based on previous sales records,

knew that the maximum recovery would be an insignificant

amount. The dissent in City of Riverside, supra, addressed this

situation as requiring “billing judgment”:

And in such a case, where the prospective

recovery is limited, it is exactly this “billing

judgment” which enables the parties to

achieve a settlement; any competent attorney,

whether prosecuting or defending a contract

action for $10,000, would realize that the

case simply cannot justify a fee in excess of

the potential recovery on the part of either

the plaintiff’s or the defendant’s attorney. All

of these examples illuminate the point made

in Hensley that “the important factor” in

determining a “reasonable” fee is the “results

obtained” 461 US at 434, 103 S Ct at 1940.

The very “reasonableness” of the hours

expended on a case by a plaintiff’s attorney

necessarily will depend, to a large extent, on

the amount that may reasonably be expected

to be recovered if the plaintiff prevails.

477 U.S. at 594, 106 S. Ct. at 2704.

As there was a limited possible recovery and no public

interest to be served by Cottman’s recovery of monetary

damages, an award of attorney fees in excess of the amount of

damages is per se unreasonable. The unreasonableness is further

17

illustrated hy the fact that Cottman waived its right to proceed

against the Defendants for civil contempt damages in December

of 1993 but continued to pursue Rosati, the agent of Defendants,

for another 18 months to collect an insignificant amount of

damages. As the damages were franchise fees and advertising

fees required to be paid by Defendants who were benefited by

not paying, a conclusion to be drawn is that the legal efforts of

Cottman against Rosati were motivated by other than a sincere

effort to collect damages.

It is not the function of a court to award attorney fees out of

proportion to a possible recovery as this elevates the cause of

action <0 one for attorney fees rather than one to recover damages

for a client. The district court clearly abused its discretion in

awarding Cottman attornev fees in an amount twenty times the

amount of the actual damages.

CONCLUSION

For the reasons stated, the petition for a writ of certiorari

should be granted.

Respectfully submitted,

A. D. ROSATI

Petitioner In Pro Per

7115 Orchard Lake Road,

Suite 140

West Bloomfield, Michigan 48322

(810) 737-4884

la

APPENDIX A — SUR PETITION FOR REHEARING OF

THE UNITED STATES COURT OF APPEALS FOR THE

THIRD CIRCUIT DATED OCTOBER 16, 1996

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-1162

COTTMAN TRANSMISSION SYSTEMS, INC.

v.

METRO DISTRIBUTING, INC. d/b/a A-I TRANSMISSIONS

OF LIVONIA; ERNEST IAFRATE; GAIL IAFRATE,

individually and on behalf of Metro Distributing, Inc. d/b/a

A-I Transmissions of Livonia; VIPER TRANSMISSIONS, INC.:

RICHARD HAMILTON, individually and on behalf of Viper

Transmissions, Inc., MARK CULBERTSON, individually and

on behalf of Viper Transmissions, Inc.: T.G.L.W., INC.; ROBERT

L. RIEMER, individually and on behalf of T.G.L.W., Inc.; J.P.

1, INC.; JAMES DILLON, individually and on behalf of J.P. 1,

INC.; JIM DIXON ENTERPRISES, INC. d/b/a A-1

TRANSMISSIONS OF WESTLAND; JIM DIXON, individually

and on behalf of Jim Dixon Enterprises, Inc. d/b/a A-1

Transmissions of Westland; G.G.S., INC. d/b/a A-]

Transmissions; JIM GREGORY, individually and on behalf of

G.G.S., Inc., d/b/a A-1 Transmissions; BODNAR, INC.;

ANTHONY A. BODNAR, individually and on behalf of Bodnar,

(E.D. PA Civil No. 92-cv-02131)

2a

Appendix A

COTTMAN TRANSMISSION SYSTEMS, INC.

Vv.

CHERRY HILL PRODUCTIONS, INC.; D.M.S., INC. of

LANSING; DARRYL SMALL, individually and on behalf of

Cherry Hill Productions Inc. and D.M.S. of Lansing; J.B.S.

ENTERPRISES, INC.; PHILIP V. VERMIGLIO, individually

and on behalf of JBS Enterprises, Inc.; G & I ENTERPRISES;

MILTON GREEN, individually and on behalf of G & I

Enterprises; PAUL IAFRATE, individually and on behalf of

G & I ENTERPRISES

(E.D. PA Civil No. 92-cv-02253)

A.D. Rosati*, Appellant

*(pursuant to F.R.A.P. 12(a))

No. 96-1180

COTTMAN TRANSMISSION SYSTEMS, INC.

Vv.

METRO DISTRIBUTING, INC. d/b/a A-I TRANSMISSIONS

OF LIVONIA; ERNEST IAFRATE; GAIL IAFRATE,

individually and on behalf of Metro Distributing, Inc. d/b/a

A-I Transmissions of Livonia; VIPER TRANSMISSIONS, INC.;

RICHARD HAMILTON, individually and on behalf of Viper

Transmissions, Inc.. MARK CULBERTSON, individually and

on behalf of Viper Transmissions, Inc.; T.G.1.W., INC.; ROBERT

L. RIEMER, individually and on behalf of T.G.I.W., Inc.; J.P.

1, INC.; JAMES DILLON, individually and on behalf of J.P. 1,

PAETRRAGANORRUARAURREOTE_ Nei nna anc neem

3a

Appendix A

INC.; JIM DIXON ENTERPRISES, INC. d/b/a A-1

TRANSMISSIONS OF WESTLAND: JIM DIXON , individually

and on behalf of Jim Dixon Enterprises, Inc. d/b/a A-1

Transmissions of Westland: G.G.S., INC. d/b/a A-1

Transmissions; JIM GREGORY, individually and on behalf of

G.G.S., Inc., d/b/a A-1 Transmissions; BODNAR, INC.:

ANTHONY A. BODNAR, individually and on behalf of Bodnar,

Inc.; SNAYYAN, INC.; AHMAD AWAD, individually and on

behalf of Snayyan, Inc.; TRI-CONTINENTAL PETROLEUM,

Inc.; TIM GAULT, individually and on behalf of Tri-Continental

Petroleum, Inc.; JULIANO INC.; FRANK A. JULIANO,

individually and on behalf of Juliano, Inc.

(E.D. PA Civil No. 92-cv-02131)

COTTMAN TRANSMISSIONS SYSTEMS, INC.

v.

CHERRY HILL PRODUCTIONS, INC:; D.M.S., INC. of

LANSING; DARRYL SMALL, individually and on behalf of

Cherry Hill Productions Inc. and D.M:S. of Lansing; J.B.S.

ENTERPRISES, INC.; PHILIP V. VERMIGLIO, individually

and on behalf of JBS Enterprises, Inc.: G & I ENTERPRISES;

MILTON GREEN, individually and on behalf of G & I

Enterprises; PAUL I[AFRATE, individually and on behalf of

G & I ENTERPRISES

(E.D. PA Civil No. 92-cv-02253)

Cottman Transmission Systems, Inc., Appellant

SUR PETITION FOR REHEARING

4a

Appendix A

Present: SLOVITER, Chief Judge, COWEN and LEWIS, Circuit

Judges

The petition for rehearing filed by AppellantA.D. Rosati in

the above-entitled case having been submitted to the judges who

participated in the decision of this court, and no judge who

concurred in the decision having asked for rehearing, the petition

for rehearing is denied.

By the Court,

s/ D. Sloviter

Chief Judge

Dated: Oct. 16, 1996

Sa

APPENDIX B — JUDGMENT ORDER OF THE UNITED

STATES COURT OF APPEALS FOR THE THIRI’

CIRCUIT DATED SEPTEMBER 23, 1996

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-1162

COTTMAN TRANSMISSION SYSTEMS, INC.,

Vv.

METRO DISTRIBUTING, INC. d/b/a A-I TRANSMISSIONS

OF LIVONIA; ERNEST IAFRATE; GAIL IAFRATE,

individually and on behalf of Metro Distributing, Inc. d/b/a A-I

Transmissions of Livonia; VIPER TRANSMISSIONS, INC.:

RICHARD HAMILTON, individually and on behalf of Viper

Transmissions, Inc., MARK CULBERTSON , individually and

on behalf of Viper Transmissions, Inc.: T.G.L.W., INC.; ROBERT

L. RIEMER, individually and on behalf of T.G.LW., Inc., J.P.

1, INC.; JAMES DILLON, individually and on behalf of J.P. 1,

INC.; JIM DIXON ENTERPRISES, INC. d/b/a A-1

TRANSMISSIONS OF WESTLAND: JIM DIXON , individually

and on behalf of Jim Dixon Enterprises, Inc. d/b/a A-1

Transmissions of Westland: G.G.S., INC. d/b/a A-1

Transmissions; JIM GREGORY, individually and on behalf of

G.G.S., Inc., d/b/a A-1 Transmissions; BODNAR, INC.:

ANTHONY A. BODNAR, individually and on behalf of Bodnar,

Inc.; SNAYYAN, INC.; AHMAD AWAD, individually and on

behalf of Snayyan, Inc.; TRI-CONTINENTAL PETROLEUM,

Inc.; TIM GAULT, individually and on behalf of Tri-Continental

Petroleum, Inc.; JULIANO INC.; FRANK A. JULIANO,

individually and on behalf of Juliano, Inc.

(E.D. PA Civil No. 92-cv-02131)

6a

Appendix B

COTTMAN TRANSMISSION SYSTEMS, INC.

Vv.

CHERRY HILL PRODUCTIONS, INC.; D.M.S., INC. of

LANSING; DARRYL SMALL, individually and on behalf of

Cherry Hill Productions Inc. and D.M.S. of Lansing; J.B.S.

ENTERPRISES, INC.; PHILIP V. VERMIGLIO, individually

and on behalf of JBS Enterprises, Inc.; G & I ENTERPRISES;

MILTON GREEN, individually and on behalf of G & I

Enterprises; PAUL IAFRATE, individually and on behalf of

G & I ENTERPRISES

(E.D. PA Civil No. 92-cv-02253)

A.D. Rosati*, Appellant

*(pursuant to F.R.A.P. 12(a))

No. 96-1180

COTTMAN TRANSMISSION SYSTEMS, INC.

v.

METRO DISTRIBUTING, INC. d/b/a A-I TRANSMISSIONS

OF LIVONIA; ERNEST IAFRATE; GAIL IAFRATE,

individually and on behalf of Metro Distributing, Inc. d/b/a A-I

Transmissions of Livonia; VIPER TRANSMISSIONS, INC.;

RICHARD HAMILTON, individually and on behalf of Viper

Transmissions, Inc.. MARK CULBERTSON, individually and

on behalf of Viper Transmissions, Inc.; T.G.I.W., INC.; ROBERT

L. RIEMER, individually and on behalf of T.G.1.W., Inc.; J.P.

1, INC.; JAMES DILLON, individually and on behalf of J.P. 1,

See ee

7a

Appendix B

INC.; JIM DIXON ENTERPRISES, INC. d/b/a A-1

TRANSMISSIONS OF WESTLAND; JIM DIXON, individually

and on behalf of Jim Dixon Enterprises, Inc. d/b/a A-1

Transmissions of Westland: G.G.S., INC. d/b/a A-1

Transmissions; JIM GREGORY, individually and on behalf of

G.G.S., Inc., d/b/a A-1 Transmissions; BODNAR, INC.:

ANTHONY A. BODNAR, individually and on behalf of Bodnar,

Inc.; SNAYYAN, INC.; AHMAD AWAD, individually and on

behalf of Snayyan, Inc.; TRI-CONTINENTAL PETROLEUM,

Inc.; TIM GAULT, individually and on behalf of Tri-Continental

Petroleum, Inc.; JULIANO INC.; FRANK A. JULIANO,

individually and on behalf of Juliano, Inc.

(E.D. PA Civil No. 92-cv-02131)

COTTMAN TRANSMISSION SYSTEMS, INC.

v.

CHERRY HILL PRODUCTIONS, INC.; D.M.S., INC. of

LANSING; DARRYL SMALL, individually and on behalf of

Cherry Hill Productions Inc. and D.M.S. of Lansing; J.B.S.

ENTERPRISES, INC.; PHILIP V. VERMIGLIO, individually

and on behalf of JBS Enterprises, Inc.; G & I ENTERPRISES;

MILTON GREEN, individually and on behalf of G & I

Enterprises; PAUL IAFRATE, individually and on behalf of

G & I ENTERPRISES

(E.D. PA Civil No. 92-cv-02253)

Coitman Transmission Systems, Inc., Appellant

8a

Appendix B

On Appeal from the United States District Court for the

Eastern District of Pennsylvania

(D.C. Nos. 92-cv-02131, 92-cv-02253)

District Judge: Hon. Raymond J. Broderick

Argued September 10, 1996

Before: SLOVITER, Chief Judge

COWEN and LEWIS, Circuit Judges

JUDGMENT ORDER

After consideration of all contentions raised by appellants,

it is

ADJUDGED and ORDERED that the judgment of the

district court entered February 2, 1996 be and is hereby affirmed.

Each party to bear its own costs.

By the Court,

s/ D. Sloviter

Chief Judge

Attest:

s/ P. Douglas Sisk

P. Douglas Sisk, Clerk

Dated: SEP 23 1996

9a

APPENDIX C — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE EASTERN DISTRICT OF

PENNSYLVANIA DATED FEBRUARY 2, 1996

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CIVIL ACTION

NO. 92-2131

COTTMAN TRANSMISSION SYSTEMS, INC.

v.

METRO DISTRIBUTING, INC., ET AL.

-and-

CIVIL ACTION

No. 92-2253

COTTMAN TRANSMISSION SYSTEMS, INC.

v.

‘CHERRY HILL PRODUCTIONS, INC., ET AL.

ORDER

AND NOW, this 2nd Day of February, 1996; for the reasons

set forth in this Court’s Memorandum of February 2, 1996;

10a

Appeadix C

IT IS ORDERED: Plaintiff’s Motion for Civil Contempt

against A.D. Rosati, Esq. is GRANTED. A.D. Rosati shall pay

compensatory damages to Cottman Transmission Systems, Inc.

in the amount of $1,358.00 and shall pay attorneys’ fees and

costs to Cottman Transmission Systems, Inc. in the amount of

$10,402.00.

s/ Raymond J. Broderick

Raymond J. Broderick, J.

lla

APPENDIX D — MEMORANDUM OF THE UNITED

STATES DISTRICT COURT FOR THE EASTERN

DISTRICT OF PENNSYLVANIA ENTERED

FEBRUARY 2, 1996

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENN SYLVANIA

CIVIL ACTION

NO. 92-2131

COTTMAN TRANSMISSION SYSTEMS, INC.

V.

METRO DISTRIBUTING, INC., ET AL.

and

CIVIL ACTION

No. 92-2253

COTTMAN TRANSMISSION SYSTEMS, INC.

-

CHERRY HILL PRODUCTIONS, INC. ET AL.

MEMORANDUM

Broderick, J. February 2, 1996

Before the Court is Cottman Transmission, Inc.’s

(“Cottman”) motion for civil contempt against A.D. Rosati,

Esquire (“Mr. Rosati”), defendants’ Michigan attorney, for

12a

Appendix D

violating this Court’s preliminary injunction order of July 17,

1992. A hearing was held on June 28, 1995 to determine whether

Mr. Rosati had engaged in a pattern of conduct to violate the

preliminary injunction and whether the Court should hold Mr.

Rosati in contempt for failing to appear for previously scheduled

contempt hearings.

For the reasons set forth below, the Court finds Mr. Rosati

in civil contempt for violating the Court’s preliminary injunction

of July 17, 1992 and will order kim to pay Cottman

compensatory damages in the amount of $1358.00 and attorneys’

fees and costs in the amount of $10,402.00.

I, BACKGROUND

The complicated history of this litigation is set forth at

length in this Court’s Memoranda of October 5, 1992 and

December 22, 1993. A condensed version follows.

Cottman, a Pennsylvania corporation, is a nationwide

franchisor of automotive transmission repair businesses.

Defendants are Michigan corporations and corporate officers

of the defendant corporations and citizens of Michigan.

Defendants operate automotive transmission repair shops in

central and southeastern Michigan. A-1 Transmissions, Inc. is a

non-party franchisor of automotive transmission repair shops

in Michigan.

In Summer 1991, Cottman and A-1 entered into an

agreement granting Cottman the exclusive use of the “A-]

Transmission” mark in Michigan and giving Cottman the right

to convert existing A-1 franchises into Cottman franchises. In

August 1991, each defendant entered into a licensing agreement

13a

Appendix D

with Cottman and a related agreement terminating its A-1

franchise. In March 1992, because Cottman had failed to comply

with certain provisions of Michigan law, it offered to rescind

the licensing agreements. On April 6, 1992, all defendants

accepted Cottman’s offer of rescission, effective Wednesday,

April 8, 1992. Cottman responded that defendants’ purported

rescissions were invalid on several grounds and advised them

that unless the deficiencies were cured, Cottman considered the

License Agreements to be valid and expected defendants to

continue to operate pursuant to the terms of those agreements.

On or about April 9, 1992, defendants ceased operating as A-1,

A-1 Cottman or Cottman transmission centers and began

Operating competing transmission repair facilities.

On or about April 10, 1992, Cottman instituted litigation in

this Court against defendants alleging that they had conspired

to violate Cottman’s exclusive right to use the “A-1

Transmission” trademark and the “Cottman” trademark in

Michigan. Cottman also alleged that defendants were exploiting

the goodwill of the Cottman mark and Causing confusion as to

the origin of the services provided by defendants.

On July 14, 1992, this Court held a hearing on Cottman’s

request for a preliminary injunction. On the basis of the evidence

presented at that hearing, this Court issued a preliminary

injunction on July 17, 1992, which provided in relevant part:

that defendants, acting alone or in concert,

combination, or agreement with others, are:

. . (3) enjoined from impeding or interfering

with Cottman’s right to use, intercept,

transfer, or otherwise exercise its rights with

respect to the telephone numbers presently

l4a

Appendix D

appearing under listings or advertisements

for “A-1/Cottman” and “Cottman” in

telephone directories.

On August 8, 1992, Cottman filed a civil contempt motion

alleging that the defendants and their Michigan attorney, Mr.

Rosati had engaged in a pattern of conduct which violated { 3

of the preliminary injunction. Specifically, Cottman asserted that

the defendants and Mr. Rosati had tried to prevent Michigan

Bell from implementing Cottman’s order to transfer phone

numbers listed under “A-1/Cottman” in telephone directories

to Cottman locations and had filed an action in Michigan state

court against Michigan Bell seeking relief contradicting this

Court’s preliminary junction.

After a contempt hearing on September 17, 1992, for which

Mr. Rosati did not appear, the Court found defendant Robert

Reimer in contempt of paragraph 3 of the preliminary injunction

for, on July 27, 1992, ordering two telephone numbers listed in

the Yellow Pages under “A-1/Cottman Transmission Centers”

disconnected. By Order of October 6, 1992, the Court continued

the hearing as to A.D. Rosati and the other defendants to

December 14, 1992 at which time they were to show cause why

they should not be held in contempt of the Court’s preliminary

injunction. Cottman served a copy of the October 6, 1992

scheduling order on Mr. Rosati.

In December, 1992, most of the defendants filed for

bankruptcy and the Court placed these actions in civil suspense

pursuant to the automatic stay triggered by the bankruptcies.

The Court postponed the contempt hearing scheduled for

December 14, 1992. In the fall of 1993, after the case was

removed from civil suspense, the parties engaged in a series of

|

|

|

|

,

15a

Appendix D

negotiations which eventually culminated in settlements with

most of the defendants in November of 1993. The remaining

defendants consented to an entry of default judgment.

Cottman advised the Court by letter dated January 18, 1994

that it still intended to pursue the contempt motion against Mr.

Rosati. A contempt hearing was scheduled several times and

finally took place on June 28, 1995.

I. Findings of Fact

Based on the “clear and convincing” evidence presented at

the contempt hearing, the Court makes the following findings

of fact:

As set forth above, on July 17, 1992, after a hearing, this

Court entered a preliminary injunction which provided in

relevant part:

that defendants, acting alone or in concert,

combination, or agreement with others, are:

- - - (3) enjoined from impeding or interfering

with Cottman’s right to use, intercept,

transfer, or otherwise exercise its rights with

respect to the telephone numbers presently

appearing under listings or advertisements

for “A-1/Cottman” and “Cottman” in

telephone directories.

Mr. Rosati is an attorney licensed to practice in the States

of Michigan and Ohio. He represented the defendant franchisees

in a series of lawsuits against Cottman in Michigan beginning

in 1992. Although he never entered an appearance in the this

16a

Appendix D

Court, he retained local counsel, assisted local counsel in

developing a defense strategy, and kept fully apprised of the

status of the litigation. Mr. Rosati admits that he received notice

of the preliminary injunction order when he was faxed a copy

the day it was entered, Friday, July 17, 1992.

Cottman also received a copy of the preliminary injunction

on Friday, July 17, 1992 and faxed a copy to Michigan Bell. At

approximately 3:30 p.m. on July 17, 1992, Cottman directed

Michigan Bell to transfer approximately seventeen phone

numbers listed in the Yellow Pages under “A-1/Cottman” to other

Cottman locations in the Detroit area. Cottman faxed typed

instructions to Michigan Bell which listed the numbers to be

transferred and the new locations for each number. Prior to July

17, 1992, Michigan Bell had consistently refused the parties’

requests to change the status of any of the phone numbers at

issue in the Cottman litigation without a court order. After

reviewing the preliminary injunction order on July 17, 1992,

however, Michigan Beli’s attorneys determined that it authorized

them to execute Cottman’s transfer request.

Michigan Bell usually implements a transfer order within

one to two business days after the order is placed. Service order

numbers confirming the request are ordinarily issued the same

day the customer places the order. Cottman’s transfer request

should have been completed by close of business on Tuesday,

July 21, 1992. In this case, however, Michigan Bell did not issue

service order numbers until late July 22, 1992 or July 23, 1992,

and the transfers were not completed until July 24, 1992. The

transfer of the numbers was delayed, therefore, by two business

days — July 22 and July 23, 1992. During these two days,

customers calling the phone numbers in question continued to

reach the defendant franchisees.

ET ER EE ST NM

17a

Appendix D

A substantial factor in causing the two-day delay in

transferring the numbers was pressure Mr. Rosati placed on

Michigan Bell to disregard the preliminary injunction order. Mr.

Rosati believed that the preliminary injunction order did not

apply to Michigan Bell because Michigan Bell was not a party

to the litigation, and that it did not authorize Michigan Bell to

transfer phone numbers listed “A-1 Cottman” in the Yellow

Pages. He also believed that the injunction did not clearly define

Cottman’s rights to the numbers. Mr. Rosati never sought

Clarification of the preliminary injunction in this Court.

Instead, beginning on July 17, 1992, Mr. Rosati began

calling Michigan Bell’s attorneys in an effort to prevent the

transfer of the phone numbers. Between July 17, 1992 at 8:25

a.m. and July 23, 1992, he placed ten calls to Michigan Bell —

three on July 17th; three on July 20th; one on July 21st; two on

July 22nd; and one on July 23rd. Mr. Rosati did not actually

reach Charles Anderson, an attorney for Michigan Bell, until

July 20, 1992 at which time he expressed his opinion that the

preliminary injunction did not apply to Michigan Bell and urged

him to disregard the order. He actually spoke to Mr. Anderson

at least one or two other times between July 20 and July 23,

1992. By making these phone calls in an effort to delay or prevent

Michigan Bell from implementing Cottman’s order, Mr. Rosati

impeded and interfered with Cottman’s right to use and transfer

the telephone numbers appearing under listings or

advertisements for “A-1/Cottman”.

During the period of time in which Mr. Rosati was

attempting to dissuade Michigan Bell from executing the

transfer, defendants were trying to establish new phone numbers.

It was to the defendants advantage to delay the transfer of the

phone numbers until they established new numbers.

18a

Appendix D

On July 24, 1992, Mr. Rosati again called Charles Anderson

to complain that certain numbers had been transferred in error.

Mr. Anderson insisted on holding a conference call with Mr.

Rosati and Todd Leff, counsel for Cottman in this Court, to

resolve the issue. They determined that none of the numbers

had been transferred in error.

On July 17, 1992, after this Court entered its injunction,

Mr. Rosati filed on action on behalf of defendants against

Michigan Bell in Michigan State Court in which he sought a

temporary restraining order and a preliminary injunction

directing Michigan Bell to maintain the status quo as to the

telephone numbers in question until further order of the

Michigan State Court. The request for a temporary restraining

order and preliminary injunction was in direct violation of this

court’s injunction. No temporary restraining order or preliminary

injunction was issued by the Michigan State Court. Furthermore,

there is no evidence that this lawsuit delayed the transfer of the

numbers.

During the four weeks prior to the transfer of the numbers,

the defendants average gross sales were $55,491.00, or $9248.00

per day (calculation based on a six day business week). During

the four weeks following the transfer of the numbers, the

defendants’ average gross sales were $35,607.00, or $5,935.00

per day. During the two days in which the phone numbers

continued to ring in the defendants’ centers, the defendants

conducted an average of $6,626.00 in additional gross sales.

Thus the loss of sales on which Cottman was entitled to 20.5%

royalties and advertising fee was $6,626.00. Cottman would have

received a royalty and advertising fee in the amount of $1,358.00.

The Court finds that Cottman sustained a loss of $1358.00 as a

result of Mr. Rosati’s contempt.

19a

Appendix D

Mr. Rosati failed to appear for contempt hearings scheduled

for September 17, 1992 and November 22, 1993. Mr. Rosati is

therefore in contempt for failure to appear or provide the Court

with an acceptable reason for his failure to appear.

II. Conclusions of Law

As a threshold matter, and as the Court made clear in its

Order of March 17, 1995 scheduling the contempt hearing for

June 28, 1995, this is an action for civil and not criminal

contempt in that Cottman seeks reimbursement for losses

sustained as a result of Mr. Rosati’s contempt and not a punitive

sanction. In a recent exploration of the distinction between

criminal and civil contempt, the Supreme Court affirmed the

longstanding principle that “whether a contempt is civil or

criminal turns on the ‘character and purpose’ of the sanction

involved. Thus, a contempt sanction is considered civil if it ‘is

remedial, and for the benefit of the complainant. But if it is for

criminal contempt the sentence is punitive, to vindicate the

authority of the court.’ ” International Union y. Bagwell, 114

S.Ct. 2552, 2557 (1994), quoting Gompers v. Bucks Stove &

Range Co., 221 U.S. 418, 441, 31 S.Ct. 492, 498 (1911).

An injunction binds not only the enjoined parties but also

non-parties who act with the enjoined parties, see Regal

Knitwear Co. v. National Labor Rel. Bd., 324 US. 9, 14, 65

S.Ct. 478, 481 (1945), and an injunction issued by a federal

district court is nationwide in scope. See Leman vy. Krentler-

Arnold Hinge Last Co., 284 U.S. 448, 451, 52 S.Ct. 238, 240

(1932); Waffenschmiadt v. Mackay, 763 F.2d 711, 716 (5th Cir.

1985), cert. denied, Currey v. Waffenschmidt, 474 U.S. 1056,

106 S.Ct. 794 (1986). Under Federal Rule of Civil Procedure

65(d), an injunction is binding upon the “parties to the action,

20a

Appendix D

their officers, agents, servants, employees, and attorneys, and

upon those persons in active concert or participation with them

who receive actual notice of the order by personal service or

otherwise.” A non-party may be held in contempt of a

preliminary injunction order if “he or she has actual knowledge

of a court’s order and either abets the defendant or is legally

identified with him.” Quinter v. Volkswagen of America, 676

F.2d 969, 972 (3d Cir. 1982).

The Court finds that Mr. Rosati was bound by the Court’s

July 17, 1992 preliminary injunction. He was counsel for the

defendants in the State of Michigan and was responsible for

retaining local counsel in this litigation. Although he was not a

party to the action in this Court, nor did he enter an appearance,

there is no question that as defendants’ Michigan counsel, he

had actual knowledge of the proceedings in this litigation. As

he admitted at the contempt hearing on June 28, 1995, he

received a copy of the preliminary injunction order on the very

day it was entered.

To establish liability for civil contempt, the moving party

must prove three elements by clear and convincing evidence:

“(1) that a valid order of the court existed; (2) that the defendants

had knowledge of the order; and (3) that the defendants

disobeyed the order.” Roe, et al. v. Operation Rescue, 54 F.3d

133, 137 (3d Cir. 1995). Wilfulness is not an element of civil

contempt. McComb v. Jacksonville Paper Co., 336 U.S. 187,

191, 69 S.Ct. 497, 499 (1949); Waste Conversion v. Rollins

Environmental Services, 893 F.2d 605, 609 (3d Cir. 1990).

The Court finds by clear and convincing evidence that a

valid order existed. Moreover, as the United States Supreme

Court has recently underscored in Celotex Corp. v. Edwards,

21a

Appendix D

115 S.Ct. 1493 (1995), quoting GTE Sylvania, Inc. v. Consumers

Union of United States, Inc., 445 U.S. 375, 386, 100 S.Ct. 1194,

1201 (1980), “ ‘persons subject to an injunctive order issued by

a court with jurisdiction are expected to obey that decree until

it is modified or reversed even if they have proper grounds to

object to the order.” Moreover, “the validity of the order may

not be collaterally challenged in a contempt proceeding for

violating the order.” Roe vy. Operation Rescue, 919 F.2d 857,

871 (3d Cir. 1990).

As set forth above, the Court also finds by clear and

convincing evidence that Mr. Rosati had actual notice of the

Court’s preliminary injunction order of July 17, 1992. Finally,

based on its findings of fact as heretofore set forth, the Court

finds by clear and convincing evidence that Mr. Rosati disobeyed

the Court’s preliminary injunction order. Thus, Mr. Rosati is in

civil contempt of the Court’s July 17, 1992 preliminary

injunction.

This Court has broad discretion to fashion an appropriate

civil contempt remedy. Woods v. Woods, 28 F.3d 396, 399 (3d

Cir. 1994); Northeast Women’s Center vy. McMonagle, 939 F.2d

57, 70 (3d Cir. 1991). The appropriate civil contempt sanction

should compensate the moving party for actual losses sustained

as a result of the contempt. See McDonald’s Corp. v. Victory

Investments, 727 F.2d 82, 87 (3d Cir. 1984).

As the Court heretofore found, the appropriate civil

contempt remedy in this case is compensatory damages in the

amount of $1,358.00. The Court also finds that Cottman is

entitled to attorneys’ fees and costs in the amount of $10,402.00.

The Third Circuit has made it clear that “attorney’s fees

may be awarded for litigation activity of in-house counsel who

22a

Appendix D

has entered an appearance and played an active role in handling

the litigation.” Delaware Valley Citizens’ Council v. Com. of Pa.,

762 F.2d 272, 278. There is no question that Mr. Leff and

associate counsel at Cottman entered appearances and actively

represented Cottman before this Court in this litigation.

Cottman has requested a total of $20,063.00 in attorneys’

fees. Cottman seeks reimbursement for 94.5 hours for Todd Leff

based on an hourly rate of $175.00 and 23.5 hours for associate

counsel based on an hourly rate of $150.00. The Court has

determined that the hourly rates requested by Cottman are

reasonable.

The Court has also determined, however, that Cottman is

entitled to be reimbursed for only 46.8 hours for Todd Leff

($8,190.00) and 10.95 hours for associate in-house counsel

($1,642.50) for a total of $9,832.50. The Court has reduced

Cottman’s request to reflect the fact that the contempt motion

was originally brought and litigated against all the defendants

and Mr. Rosati. A settlement was reached with the defendants

in late November, 1993, thereby terminating this litigation and

the contempt as to the defendants. As heretofore pointed out,

the settlement did not terminate Cottman’s contempt motion as

to Mr. Rosati. The Court has determined that Mr. Rosati’s share

of Cottman’s fees prior to the termination of the litigation is

7.1% and that his share after the settlement was reached with

the defendants is 100%. Likewise, the court will reduce the fees

sought by Cottman for its Michigan attorneys from $1,053.00

to $75.00. Finally, Cottman is also entitled to be compensated

for expenses in the amount of $494.00.

An appropriate Order follows.

23a

APPENDIX E — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE EASTERN DISTRICT OF

PENNSYLVANIA FILED JUNE 28, 1995

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENN SYLVANIA

CIVIL ACTION

NO. 92-2131

COTTMAN TRANSMISSION SYSTEMS, INC.

7,

METRO DISTRIBUTING, INC., ET AL.

-and-

CIVIL ACTION

No. 92-2253

COTTMAN TRANSMISSION SYSTEMS, INC.

V.

CHERRY HILL PRODUCTIONS, INC., ET AL.

ORDER

AND NOW, this 27th day of June, 1995:A.D. Rosati having

filed a Motion to Vacate the Court’s July 17, 1992 Preliminary

Injunction Order on the grounds that the record from the

preliminary injunction hearing shows that Cottman failed to

24a

Appendix E

establish irreparable injury or reasonable probability of eventual

success on the merits; Cottman having filed a Motion for

Sanctions against Mr. Rosati for filing said Motion to Vacate in

violation of Fed. Rule Civ. Proc. 11; A.D. Rosati having also

filed a Motion to Strike Cottman’s Claim for Compensatory

Damages on the ground that Plaintiffs’ objected to some of Mr.

Rosati’s interrogatories and provided non-responsive answers

to others; the Court having considered all of the above motions;

IT IS ORDERED: A.D. Rosati’s Motion to Vacate the

Court’s July 17, 1992 Preliminary Injunction is DENIED.

IT IS FURTHER ORDERED: Cottman’s Motion for

Sanctions against Mr. Rosati for filing said Motion to Vacate in

violation of Fed. Rule Civ. Proc. 11 is DENIED.

IT IS FURTHER ORDERED: A.D. Rosati’s Motion to

Strike Cottman’s Claim for Compensatory Damages is DENIED.

s/ Raymond J. Broderick

Raymond J. Broderick, J.