MAX O. COGBURN, JR., District Judge.
On December 21, 2017, Plaintiffs Hyundai Motor America, Inc. and Hyundai Motor Company (collectively "Hyundai" or "Plaintiff") filed this action against Defendant Direct Technologies, International, Inc. ("DTI"), alleging that DTI is engaging in trademark infringement by purchasing Hyundai branded parts abroad, importing the Hyundai branded parts into the United States, and then reselling the Hyundai branded parts in the United States—thus, selling so-called "gray market" auto parts. (Doc. No. 1). After the Court denied DTI's motion to dismiss, DTI filed its Answer in May 2018 and counterclaimed for illegal restraint of trade in violation of the Sherman Act, 15 U.S.C. §§ 1 & 2, exclusive dealing in violation of the Clayton Act, 15 U.S.C. § 14, false advertising and unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a), and unfair competition under N.C. GEN. STAT. § 75-1.1 et seq. (Doc. No. 33). The Court denied Plaintiff's motion to dismiss the counterclaims in August 2018, (Doc. No. 44), and Plaintiff filed an Answer in October 2018. (Doc. No. 47). The parties are in discovery and trial in this matter is set for June 2020. See (Doc. No. 50).
On May 3, 2019, Hyundai initiated an action in the International Trade Commission ("ITC"), requesting that the ITC investigate DTI's and three of its foreign suppliers' purported unlawful importation and sale after importation of gray market replacement automotive service and collision parts and components, in violation of Section 337.
On May 9, 2019, notice that Hyundai's Complaint had been received by the ITC was published in the Federal Register. (Doc. No. 55-2: Keller Decl., Ex. B). On May 17, DTI submitted comments to the ITC in which DTI presented its antitrust and anti-competitive arguments and requested that the ITC either (1) refuse to institute an investigation or (2) have the Administrative Law Judge determine that the alleged anti-competitive acts were in the public interest, thereby preventing any remedial orders from taking effect. (Doc. No. 55-3: Keller Decl., Ex. C).
On June 7, 2019, the ITC published a notice in the Federal Register to inform the public that it had instituted an investigation on May 31, 2019. (Doc. No. 55-4: Keller Decl., Ex. D). The ITC instituted the investigation after considering DTI's comments, including its antitrust and anti-competitive arguments, and refused DTI's request that the Administrative Law Judge make a determination regarding DTI's alleged anti-competitive arguments. (
DTI was served with the ITC Complaint on June 4, 2019. Two days later, DTI's counsel appeared in the ITC investigation. (Doc. No. 55-5: Keller Decl., Ex. E). DTI's response to the ITC complaint was due on June 25, 2019. Discovery in the ITC investigation began on June 7, 2019, and DTI served interrogatories and requests for production on Hyundai on June 10, 2019. (Doc. No. 55 at ¶ 8: Keller Decl.). DTI filed the pending motion on June 12, 2019. In the motion, DTI seeks an order from this Court, pursuant to 28 U.S.C. § 1651 (the "All Writs Act"), staying the ITC action. More specifically, DTI seeks an order from this Court enjoining Plaintiff from participating in the pending ITC action, and from pursuing, enforcing, or seeking to enforce, an exclusion order, cease and desist order, or other injunctive relief relating to certain replacement automotive service and collision parts and components thereof, pending the resolution of this action. This Court held a hearing in this matter on June 20, 2019, and this matter is now ripe for disposition.
The ITC was enacted to investigate violations of the trade statute enumerated in Section 337 of the Tariff Act of 1930, as amended.
Congress authorized and anticipated parallel proceedings in the district courts and the ITC, as the district court and the ITC provide different remedies. Apparently recognizing the complications that may arise from parallel proceedings, in 1994 Congress enacted 28 U.S.C. § 1659(a), which states that "[i]n a civil action involving parties that are also parties to a proceeding before [the ITC], at the request of a party to the civil action that is also a respondent in the proceeding before the Commission, the district court shall stay, until the determination of the Commission becomes final, proceedings in the civil action with respect to any claim that involves the same issues involved in the proceeding before the Commission...." 28 U.S.C. § 1659.
While Congress has enacted a statute allowing a district court action to be stayed pending an ITC action, there is no corresponding statute for the reverse of that procedure. DTI argues, however, that this Court may nevertheless stay the pending ITC action under the All Writs Act, which provides that the "Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651(a). For the following reasons, the Court disagrees.
First, as
Next, every federal court presented with a motion under similar circumstances has refused to enjoin the ITC proceeding in favor of a parallel district court case. For example, the Central District of California recently denied a motion to enjoin ITC proceedings after holding that the movant had "pointed to no authority by which a district court may enjoin a litigant from pursuing parallel proceedings before the ITC in the circumstances here."
In its motion, DTI cites two district court cases to support its argument that a court may, under the All Writs Act, enjoin parties from participating in an ITC action until the district court case is resolved. However, the facts of both cases are clearly inapplicable. First, in
DTI also appears to rely on a first-to-file argument, contending that because this case was filed a year and a half before the ITC action, the ITC action should now be stayed.
The Court further finds that the ITC action should not be stayed because the distinct remedies available at the ITC provide trademark holders such as Hyundai with relief in addition to that provided by the district court, including exclusion orders and cease and desist orders.
Although the Court is going to deny DTI's motion, the Court observes that Congress has created a situation in which ITC orders have the potential to have practical, de facto preclusive effects in trademark infringement actions in the federal district courts. The Fourth Circuit Court of Appeals has already stated, albeit in an unpublished opinion, that "[t]he ITC has full authority to decide trademark claims and its adjudications of unfair trade practice and trademark infringement causes of action are entitled to res judicata [claim preclusion] effect."
Congress has created a streamlined way to deal with the problem of infringing products being imported into the United States by allowing the ITC to block importation of the infringing products through exclusion orders. The problem arises when the agency's findings in blocking the imports cannot be overturned by a hearing on the merits in a United States district court. Thus, if the product at issue is exclusively manufactured outside the United States (and cannot be manufactured in the United States), then an ITC exclusion order blocking importation may well shut down the company's business, even if a jury in federal district court finds that the products do not infringe.
Suppose that, in the ITC action in this matter, the ITC finds that the parts that DTI imports have infringed Plaintiff's trademark. The ITC may then issue an exclusion order, banning the importation of the parts. Then, suppose that a jury in this Court adjudicates Hyundai's claims against DTI and finds that DTI has not infringed. If the parts that DTI sells are banned from being imported into this country, then DTI obviously cannot sell those parts, even if a jury in this Court has determined that DTI is not infringing on Hyundai's trademark. Although the ITC has the authority to rescind an exclusion order, this federal district court cannot force the ITC to rescind its own order.
If the Commission finds a violation of section 337, it then determines the appropriate remedy, which may include an exclusive order, which directs the U.S. Customs Service to bar the subject articles from importation into the United States, or issue a cease and desist order. Before ordering a remedy, the Commission must evaluate the impact of the ordered remedy on the public interest by considering the effect "upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers." 19 U.S.C. §§ 1337(d) and (f). Thereafter, the ITC transmits its determination and order to the President, who has 60 days within which to approve the determination or disapprove it for "policy reasons."