Appeals from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Terrence W. Boyle,
District Judge. (5:14-cv-00482-BO)
Argued: January 25, 2018
Moeller Newman, CRANFILL, SUMNER & HARTZOG, LLP, Raleigh,
North Carolina, for Appellants.
Freya Olive, OLIVE & OLIVE, PA, Durham, North Carolina,
K. Shere, Jaye E. Bingham-Hinch, David G. Williams, CRANFILL,
SUMNER & HARTZOG, LLP, Raleigh, North Carolina, for
L. McKenzie, OLIVE & OLIVE, PA, Durham, North Carolina,
GREGORY, Chief Judge, and NIEMEYER and AGEE, Circuit Judges.
finding that Rainbow Early Education Holding LLC ("Early
Education") had violated the terms of a consent judgment
and permanent injunction, the district court held Early
Education in contempt and awarded $60, 000 to Rainbow School,
Inc. ("the School"), plus attorney's fees and
costs. When the School moved for additional relief based on
what it alleged to be continued and new violations of the
injunction, the district court deferred a final determination
and ordered Early Education to pay for an audit to assist in
determining whether violations remained and could reasonably
be cured. Early Education appeals both decisions. For the
reasons set out below, we affirm the district court's
finding of contempt and award of sanctions, and dismiss for
lack of jurisdiction Early Education's appeal from the
order requiring it to undergo an audit.
School has run a childcare facility-Rainbow School-in
Fayetteville, North Carolina, for over twenty years. In
addition to using the word "rainbow" in its name,
the School uses rainbow imagery on its logo.
Education operates approximately 100 childcare facilities in
several states, including North Carolina. In December 2014,
Early Education opened a Fayetteville branch near the School.
It operated under the name "Rainbow Child Care
Center" ("the Fayetteville facility"), and,
like the School, it also used rainbow imagery on its logo.
a few weeks of the Fayetteville facility's opening, the
School sued Early Education in the United States District
Court for the Eastern District of North Carolina for common
law trademark infringement; false advertising and false
designation of origin in violation of the Lanham Act; and
unfair and deceptive trade practices in violation of North
Carolina law. Following discovery and the district
court's issuance of a preliminary injunction against
Early Education, the Parties entered into a settlement
agreement. The district court entered a consent judgment and
permanent injunction consistent with that agreement.
the terms of the consent judgment, Early Education did
"not contest entry of judgment . . . as though the
allegations of trademark infringement had been proven at
trial." J.A. 77. Early Education was enjoined from:
• "doing business as 'Rainbow Child Care
Center' in the Fayetteville, North Carolina metropolitan
• "using the word 'Rainbow' in connection
with their business in the Fayetteville metropolitan area,
including but not limited to use by them of the word
'Rainbow' in connection with the provision of child
care, preschool, before-school, afterschool, and summer camp
services in the Fayetteville metropolitan area";
• "using the web address . . .
/fayetteville2 address")] or any other web address or
domain name using the word 'rainbow' in connection
with any business or services offered by them in the
Fayetteville metropolitan area";
• "using any rainbow design on any website or
domain identifying or advertising any business or services
offered by them in the Fayetteville, North Carolina
metropolitan area, but this restriction . . . does not . .
.restrict or prevent the use of the word 'rainbow' or
a rainbow design on the general corporate website."
77-78. In addition, Early Education agreed to
redirect their new website with respect to any connection to
the main corporate website for Rainbow Child Care Centers
found at www.rainbowccc.com [by] creating a
stand-alone web page for the [Fayetteville facility] and
routing all links to www.rainbowccc.com through a
forwarding page so that the word "rainbow" will not
appear on the standalone web page for [the Fayetteville
facility], even as a forwarding tag. . . . [A]nd there shall
not be any links from [Early Education's] main corporate
website to the stand-alone web page for [the Fayetteville
addition, the settlement agreement-though not the consent
judgment- contained a liquidated damages clause setting out
how the Parties would handle violations of the injunction.
The Parties agreed that a material breach of the permanent
injunction "could cause harm to" the School's
business. J.A. 186. If the School believed Early Education
was violating the injunction, the School was required to
provide Early Education with written notice. Early Education,
in turn, had ten days following receipt of the notice to cure
the violation. If Early Education failed to cure the
violation in that time, or if it had committed four
violations within one year, the School could "seek a
court order requiring compliance" with the injunction.
J.A. 186. And if a court determined that Early Education had
violated the injunction and not cured it, then Early
Education would be "liable to [the School] for
liquidated damages in the amount of $30, 000.00, ...