United States District Court, W.D. Michigan, Southern Division
U.S. FILTER/JWI, INC., Plaintiff,
J-PARTS, LLC, Defendants. EVOQUA WATER TECHNOLOGIES LLC, Plaintiff,
M.W. WATERMARK, LLC, Defendants.
J. JONKER CHIEF UNITED STATES DISTRICT JUDGE
2003, U.S. Filter/JWI, Inc. sued one of its competitors,
J-Parts, LLC, and J-Parts' owner, Michael Gethin (File
No. 5:03-CV-127). U.S. Filter claimed that Gethin and J-Parts
had misused U.S. Filter's trademarks and proprietary
information. J-Parts subsequently changed its name to M.W.
Watermark, LLC, and the parties eventually settled the case.
As part of the settlement, the parties agreed to the entry of
a judgment and permanent injunction prohibiting Gethin and
Watermark from using certain trademarks and proprietary
information belonging to U.S. Filter. (See Final J.
& Permanent Inj., No. 5:03-CV-127, ECF No. 24.)
years later, Evoqua Water Technologies LLC filed a new suit
against Gethin and Watermark (File No. 1:16-CV-14), claiming
that Evoqua is the successor-in-interest to U.S. Filter, and
alleging that Watermark and Gethin were in violation of the
permanent injunction. Among other things, Evoqua asked for
civil contempt sanctions against Watermark and Gethin. The
Court held a hearing in the new case and found that Watermark
and Gethin had violated the terms of the injunction. As part
of its civil contempt sanction, the Court directed Watermark
and Gethin to pay Evoqua's reasonable attorney's fees
for bringing the new lawsuit and its motion for sanctions. No
party at the time questioned whether a proceeding for
contempt properly belonged in a new case with a new party
plaintiff, or whether a proceeding in the original action
with the original plaintiff was necessary.
subsequently asked the Court to modify or dissolve the
permanent injunction, and Evoqua sought to substitute itself
as the plaintiff in 5:03-CV-127. In response to Evoqua's
motion, Watermark disputed Evoqua's contention that
Evoqua is the successor-in-interest to U.S. Filter, an issue
that it first raised in its answer to Evoqua's complaint
but did not litigate in response to Evoqua's request for
sanctions. The Court denied both motions without prejudice
because it wanted to ensure that all interested parties were
before the Court. The Court asked the parties to provide
further briefing on whether Evoqua is, in fact, the
successor-in-interest to U.S. Filter. After the parties did
so, it became clear that Evoqua claims to be the
successor-in-interest to U.S. Filter based on a series of
corporate mergers and an assignment of assets.
Court then asked the parties to brief the following
questions: (1) whether the consent judgment is assignable;
(2) whether the consent judgment was actually assigned; and
(3) whether the contempt finding should be vacated if there
was no effective assignment. The parties have filed their
briefs in response to the Court's order. They have also
filed motions asking the Court to seal certain portions of
their briefs and exhibits thereto. (No. 5:03-CV-127, ECF Nos.
46, 51, 55.)
review, the Court finds that the consent judgment may not be
enforced by Evoqua as an assignee of U.S. Filter.
Consequently, the contempt finding in 1:16-CV-14 must be
vacated because Evoqua lacks standing to enforce the
injunction. In addition, the motions to seal will be granted
in part and denied in part.
Evoqua's Right to Enforce the Consent Judgment
party's ability to enforce a consent judgment raises an
issue of standing. “[A] well-settled line of authority
. . . establishes that a consent decree is not enforceable
directly or in collateral proceedings by those who are not
parties to it even though they were intended to be
benefit[t]ed by it.” Blue Chip Stamps v. Manor Drug
Stores, 421 U.S. 723, 750 (1975). Generally,
“third parties, even intended third-party
beneficiaries, lack standing to enforce their interpretations
of agreed judgments.” Sanders v. Republic Servs. of
Ky., LLC, 113 F. App'x 648, 650 (6th Cir. 2004).
determine whether a consent judgment can be enforced by an
assignee of one of the parties, the Court looks to the
language of the consent judgment itself. “A consent
judgment is a hybrid of a contract and a judicial act.”
Universal Settlements Int'l, Inv. v. Nat'l
Viatical, Inc., 568 F. App'x 398, 404 (6th Cir.
2014) (citing Local No. 93, Int'l. Ass'n of
Firefighters, AFL-CIO C.L.C. v. City of Cleveland, 478
U.S. 501, 519 (1986)). “It mirrors a contract in that
it reflects ‘an agreement by the parties, ' and it
is a judicial act because it ‘places the power and
prestige of the court behind the compromise struck by the
parties.'” Id. (quoting Williams v.
Vukovich, 720 F.2d 909, 920 (6th Cir. 1983)). “As
a judicial act, consent judgments must be ‘strictly
construed to preserve the bargained for position of the
parties.'” Id. (quoting Williams,
720 F.2d at 920).
Consent decrees are entered into by parties to a case after
careful negotiation has produced agreement on their precise
terms. The parties waive their right to litigate the issues
involved in the case and thus save themselves the time,
expense, and inevitable risk of litigation. Naturally, the
agreement reached normally embodies a compromise; in exchange
for the saving of cost and elimination of risk, the parties
each give up something they might have won had they proceeded
with the litigation. Thus the decree itself cannot be said to
have a purpose; rather the parties have purposes, generally
opposed to each other, and the resultant decree embodies as
much of those opposing purposes as the respective parties
have the bargaining power and skill to achieve. For these
reasons, the scope of a consent decree must be discerned
within its four corners, and not by reference to what might
satisfy the purposes of one of the parties to it.
United States v. Armour & Co., 402 U.S. 673, 681
(1971) (emphasis added; footnote omitted); accord Shy v.
Navistar Int'l Corp., 701 F.3d 523, 530 (6th Cir.
consent judgment in this case does not provide for
enforcement by an assignee of U.S. Filter. It binds the
“successors and assigns” of Watermark and Gethin
(No. 5:03-CV-127, ECF No. 24, PageID.356), but includes no
similar language pertaining to U.S. Filter. The judgment
itself is in favor of only U.S. Filter, not its successors
similar case, the Federal Circuit held that an assignee of a
party to a consent judgment could not enforce it because
“nothing expressly set out in the consent judgment . .
. extend[ed] [those enforcement] rights to any third
party[.]” Thatcher v. Kohl's Dep't Stores,
Inc., 397 F.3d 1370, 1375 (Fed. Cir. 2005). As in this
case, the consent judgment in Thatcher resulted from
the settlement of claims regarding the infringement of
intellectual-property rights. Like Evoqua, the party seeking
to enforce the consent judgment in Thatcher claimed
to acquire those intellectual-property rights by assignment.
Id. at 1373. And like the consent judgment in this
case, the consent judgment in Thatcher enjoined the
“successors-in-interest” of one party, but said
nothing about whether successors-in-interest of the other
party could enforce it. Id. at 1375. “This
silence, ” the court held, “is the functional
equivalent of the parties' express intent to exclude
language of assignment.” Id. Likewise, this
Court interprets the absence of any reference to the
successors and assigns of U.S. Filter in the consent
judgment, coupled with express language binding
Watermark's successors and assigns, as precluding
enforcement by Evoqua, an assignee of U.S. Filter. The
enforcement rights of the consent judgment belong to U.S.
points to the settlement agreement between U.S. Filter and
Watermark, which states that “[t]he terms of this
Agreement shall be binding upon and inure to the benefit of
the Parties and their respective heirs and assigns.”
(Settlement Agreement, No. 1:16-CV-14, ECF No. 1-8,
PageID.365.) However, “Agreement” is defined as
“This Settlement Agreement and Mutual Release.”
(Id.) It does not include the consent judgment
itself. Indeed, the settlement agreement requires the parties
to stipulate to entry of a judgment and permanent injunction
“in the form attached to this Agreement,
” which necessarily means that the consent judgment is
separate from the settlement agreement. (Id. at
PageID.362 (emphasis added).) Moreover, the consent judgment
does not refer to, or incorporate, the terms of the
settlement agreement. Thus, unlike the settlement agreement,
the consent judgment does ...