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Pearle Vision, Inc. v. Romm

September 3, 2008

PEARLE VISION, INC., A DELAWARE CORPORATION, AND PEARLE, INC., A DELAWARE CORPORATION, PLAINTIFFS-APPELLEES,
v.
VICTOR ROMM, INDIVIDUALLY AND D/B/A ROMM & CO., INC., ROMM VISION ENTERPRISES, INC., ET AL., DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 04 C 4349-Joan Humphrey Lefkow, Judge.

The opinion of the court was delivered by: Manion, Circuit Judge.

ARGUED JANUARY 23, 2008

Before MANION, ROVNER, and EVANS, Circuit Judges.

Pearle Vision, Inc. ("Pearle Vision") filed suit against Victor Romm and three of his companies alleging violations of their franchise agreements. The district court entered a preliminary injunction directing Romm to make certain items, including patient files, available to Pearle Vision. The district court eventually found that Romm was not complying with the in-junction, and entered a $1,000 per day contempt sanction to remain in effect until the items at issue were provided to Pearle Vision. After finding that Romm never com-plied with its order, the district court entered judgment on the contempt in the amount of $321,000. Romm appeals arguing that he was not given an opportunity to purge the contempt, that the amount of the judgment was excessive, and that the district court failed to exercise the leniency normally afforded pro se litigants. We affirm.

I.

Romm is an optometrist who, until 2004, operated four Pearle Vision stores pursuant to franchise agreements he had entered into with Pearle Vision. On June 29, 2004, Pearle Vision filed suit alleging that Romm had materially defaulted under those agreements.*fn1 Romm's alleged infractions included incorrectly charging customers or charging them for services or products not received, poor record keeping, and abandoning at least one store for three or more days. Pearle Vision sought damages for Romm's violation of the franchise agreements, as well as a permanent injunction prohibiting Romm from further operating the stores and granting possession of them to Pearle Vision.

On August 13, 2004, Pearle Vision filed a motion for a preliminary injunction asking the court to enjoin Romm from further possessing or operating the stores, using either the "Pearle" or "Pearle Vision" marks, or competing with Pearle Vision within three miles of the stores in question. The parties appeared for a hearing on September 27, 2004.*fn2 They informed the court that they had come to an agreement where Romm would cease operation and give up possession of the stores, and cease using Pearle Vision's marks. Two days later, however, Pearle Vision filed an emergency motion for a preliminary injunction in which it alleged that Romm was observed after 9:00 p.m. on September 28, 2004, removing boxes from one of the stores and loading them onto a rental truck. Pearle Vision asserted that this violated portions of the franchise agreement requiring Romm to cooperate in an orderly change of management when the agreements were terminated, as well as giving Pearle Vision the right to purchase equipment present in the stores. Pearle Vision also argued that Romm was obligated under their agreement to give it copies of all his patient records. Romm responded that he had moved the items in question to a storage unit, and that he was entitled to do so because Pearle Vision failed to exercise its purchase right upon initiating termination procedures in June 2004. On September 30, 2004, the court entered an emergency preliminary injunction directing Romm to make all of the store's equipment available to Pearle Vision, and further stating "that Pearle Vision shall have the right to inspect and remove all patient charts and records, including all records relating to optometric or opthomologic services from the operations on the premises, and inspect any hard drive which may contain any such information."

On October 5, 2004, Pearle Vision filed the first of three petitions for a rule to show cause alleging that Romm had failed to comply with the September 30 injunction. Pearle Vision alleged, among other things, that Romm had failed to make available to Pearle Vision's representative all of his patient records. These allegations were later verified by Franchise Manager Michael Maziarek who testified at a hearing that the only patient records he found at Romm's storage unit were three Tupperware trays containing records no more current than 1999. When Maziarek asked Romm about the remaining records, Romm stated that anything not in the unit was at the stores. Maziarek visited the stores the following day, but again did not find any records more current than 1999. He did find file drawers labeled "2003" and "2004," but they were empty. At the hearing on Pearle Vision's petition, the court told Romm that it appeared he had violated the court's order and that he was going to be sanctioned, but that the sanction would be reduced if he complied by making the delivery to Pearle Vision in a timely fashion. The district court issued an order on October 6, 2004, directing Romm to show cause why he should not be held in contempt of court, and further directing him to deliver to Pearle Vision, by 2:00 p.m. that day at a Pearle Vision store in South Elgin, the equipment and records as set forth in its September 30 injunction.

Despite this clear direction, Romm failed to show up on October 6, prompting Pearle Vision to file its second petition the following day. The court issued another order, this time directing Romm to make delivery of the relevant items to Pearle Vision by 1:00 p.m. of that day, and again directing Romm to show cause why he should not be held in contempt of court. Romm was not present at the hearing on the second petition, but the district court judge informed his counsel, who was present, that there was "undoubtedly" going to be a sanction imposed on Romm for his conduct and that she was "shocked and appalled" by Romm's behavior.

On October 12, 2004, Pearle Vision filed its third petition for a rule to show cause. Pearle Vision alleged that Romm arrived as directed on October 7, but still failed to comply fully with the court's injunction. First, Pearle Vision claimed that Romm had failed to return the total amount of equipment that would have been present in fully equipped stores, and provided an itemized list of what it believed to be missing. More importantly, Pearle Vision alleged that Romm had failed to produce all of the patient records. It admitted that Romm delivered boxes of patient records which were later determined to cover the years following 1999. Romm also delivered three personal computers, but they contained no patient data. This was not unusual because Pearle Vision stated that the normal set-up in its stores was to have personal computer input terminals which relayed patient data to a central server that stored the information. However, Romm did not produce a server. Thus, there was no way to verify that all the physical records had been turned over. Pearle Vision claimed to be further aggrieved because computer utilization of the patient files facilitates easier searches of their contents and status.

A hearing on the third petition was held on October 14, 2004. While the hearing was not completed that day, the court believed it had sufficient information before it to establish Romm's non-compliance with its injunction order. Therefore, on that same day, the court entered an order sanctioning Romm at the rate of $1,000 per day until such time as he complied with the court's September 30 injunction order by producing the equipment and patient records in question. The court further stated that the sanction was subject to its ultimate findings after completing the hearing.

The court resumed the hearing on October 22, 2004, and heard testimony from Romm, Maziarek, and a computer analyst named Gary Wadhani, who had analyzed the computers received from Romm to determine their con-tents. Wadhani confirmed the allegations Pearle Vision made earlier that there was no patient data contained on the machines. Wadhani also testified that upon starting the computers, they attempted to connect to a server, and that they were therefore likely only work stations meant to connect to the machine that actually contained data. Romm testified that he did not want to be in contempt of court, and that he had returned everything he had to Pearle Vision. Moments later, however, he testified that he had maintained patient information, such as addresses, appointment dates, and prescription information, on computers in his stores.

The court found that Wadhani's testimony, as well as Romm's admission that he kept patient data on computers, cast doubt on Romm's assertion that he had complied with the court's order to deliver all patient records to Pearle Vision. After noting its hope that the sanction amount would not turn into an actual judgment, the court expressed its belief that Romm was not in compliance with the injunction order. It stated that Romm had been given an opportunity to explain what happened to the data patient files and had failed to do so and that the $1,000 per day sanction would remain in place until Romm could establish compliance with the court's order.*fn3

On September 12, 2005, the district court entered sum-mary judgment on the merits of the case in favor of Pearle Vision in the amount of $325,521.99. The court also directed Romm to show cause why $321,000 in sanctions should not be added to the judgment. This was the amount to which the $1,000 per day sanction had accumulated between October 14, 2004, and September 1, 2005, the date Pearle Vision's motion for summary judgment was granted. This amount was not set in stone, however, as Romm was afforded the opportunity to file his individual and corporate tax returns for the years 2002 through 2004 "[i]n order to ascertain the correct amount of the judgment to be entered on this sanction." Additionally, the ...


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