HIDROFILTROS, DE MÉXICO, S.A. DE C.V., and JOSÉ SALTIEL ABOUAF v. Rexa Ir, Inc.

*The Honorable D avid W . McKeague, United States District Judge
for the Western District of Michigan, sitting by designation.
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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0001P (6th Cir.)
File Name: 04a0001p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
HIDROFILTROS, DE MÉXICO,
S.A. DE C.V., and JOSÉ
SALTIEL ABOUAF,
Plaintiffs-Appellants,
v.
REXA IR, INC.,
Defendant-Appellee.
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No. 02-1823
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 01-74653—Avern Cohn, Senior District Judge.
Argued: December 2, 2003
Decided and Filed: January 6, 2004
Before: MARTIN and MOORE, Circuit Judges;
McKEAGUE, District Judge.*
2 Hidrofiltros, et al. v. Rexair No. 02-1823
_________________
COUNSEL
ARGUED: Michael M. Jacob, RAYMOND & PROKOP,
Southfield, Michigan, for Appellants. Peter R. Bisio,
HOGAN & HARTSON, Washington, D.C., for Appellee.
ON BRIEF: Michael M. Jacob, Kevin E. Sralla,
RAYMOND & PROKOP, Southfield, Michigan, Howard B.
Rockman, BARNES & THORNBURG, Chicago, Illlinois, for
Appellants. Peter R. Bisio, Craig A. Hoover, HOGAN &
HARTSON, Washington, D.C., Jeffrey A. Sadowski,
HOWARD & HOWARD, Bloomfield Hills, Michigan, for
Appellee.
_________________
OPINION
_________________
BOYCE F. MARTIN, JR., Circuit Judge. This case
involves a straightforward interpretation of a settlement
agreement that disposed of a previous trademark-related
lawsuit that Rexair, Inc. filed in the district court in 1995
against José Saltiel Abouaf and his company, Hidrofiltros, de
México, S.A. de C.V. Saltiel and Hidrofiltros have filed a
complaint alleging that Rexair breached the settlement
agreement by filing a trademark infringement lawsuit in a
Portuguese court against an individual who is allegedly
“affiliated” with Saltiel. The district court dismissed the
complaint, holding that the settlement agreement did not
prohibit Rexair from filing its Portuguese lawsuit. Because
we believe there is no other reasonable interpretation of the
settlement agreement, we affirm the district court’s judgment.

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No. 02-1823 Hidrofiltros, et al. v. Rexair 3
I. BACKGROUND
A. The Underlying Lawsuit
Rexair is the manufacturer of the “Rainbow” vacuum
cleaner, which it distributes in over eighty countries. Prior to
the 1995 litigation, Saltiel had distributed Rexair’s products
in Mexico through his company, Hidrofiltros. In 1995,
Rexair filed a complaint in the district court against Saltiel
and Hidrofiltros, alleging that they manufactured – through
another company owned by Saltiel, called Turmix – and sold
a knock-off of the Rainbow called the “Robot.” Rexair’s
complaint asserted various contract, tort, trademark and
copyright claims, and Saltiel and Hidrofiltros, in turn,
asserted several counterclaims. The district court dismissed
Rexair’s trademark and copyright claims for lack of
jurisdiction because the alleged acts of infringement took
place in Mexico and were perpetrated by Mexican citizens.
It also dismissed Saltiel’s and Hidrofiltros’s counterclaims.
After those rulings, the only claims that remained were
Rexair’s contract and business tort claims.
B. The Settlement Agreement
The parties subsequently entered into the settlement
agreement at issue in this case, by which Saltiel and
Hidrofiltros agreed, among other things, to pay Rexair a total
of $100,000.00 and to refrain from infringing Rexair’s
Rainbow trademark in the future, in exchange for the
voluntary withdrawal of Rexair’s remaining contract and tort
claims. The relevant provisions of the settlement agreement,
for purposes of this appeal, are paragraphs 2a and 3.
Paragraph 2a states:
Saltiel and Hidrofiltros agree not to use, either directly or
indirectly (e.g., through Saltiel family members, agents,
employees or companies owned or controlled by or
affiliated with Saltiel), any of Rexair’s trademarks or any
confusingly similar trademarks in either printed materials
4 Hidrofiltros, et al. v. Rexair No. 02-1823
or on machines or accessories. Saltiel and Hidrofiltros
also agree not to use, either directly or indirectly (e.g.,
through Saltiel family members, agents, employees or
companies owned or controlled by or affiliated with
Saltiel), any product manual or packaging (including the
box in which the Robot vacuum cleaner is marketed or
sold), that is the same or confusingly similar to those
used for Rexair’s Rainbow® products. The sole
exception to this is that Saltiel and Hidrofiltros or their
agents or affiliates, without being deemed to be in
violation of the foregoing provisions of this subparagraph
2.a., may use up the remaining stock of certain existing
materials in conjunction with the sale of Robot vacuum
cleaners . . . .
Paragraph 3 states:
The parties agree that the Court in which this Action is
pending [i.e., the United States District Court for the
Eastern District of Michigan] will retain exclusive and
continuing jurisdiction over this Agreement and over
Saltiel, Hidrofiltros and Rexair for purposes of enforcing
this Agreement . . . .
C. The Present Dispute
Following the execution of the settlement agreement, no
disputes arose between the parties for almost four years. In
May 2001, however, the situation changed. Rexair filed a
lawsuit in Lisbon, Portugal, against Joao Paulo da Silva
Vilarinho, an individual who sold Turmix’s Robot vacuum
cleaners in Portugal. Rexair alleged that by importing and
selling those vacuum cleaners, Vilarinho, through his
company, Delphin Lusitana Lda, infringed its Rainbow
trademark. Accordingly, Rexair requested a seizure of the
allegedly infringing products and sought an injunction
preventing Vilarinho from importing and selling them.

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No. 02-1823 Hidrofiltros, et al. v. Rexair 5
1Rexair subsequently appealed to the supreme court of Portugal, but
later voluntarily withd rew that appeal.
On July 5, 2001, Saltiel and Hidrofiltros filed a motion in
the district court seeking a temporary restraining order and a
preliminary injunction prohibiting Rexair from proceeding
with the Portuguese lawsuit against Vilarinho. On July 31,
after briefing and oral argument, the district court denied the
motion in a telephonic hearing, reasoning that it would be
inappropriate to enjoin an ongoing case in Portugal. On
July 25, the Portuguese trial court denied Rexair’s motion for
injunctive relief against Vilarinho, a decision that the
Portuguese appellate court affirmed on November 20.1
On December 6, Saltiel and Hidrofiltros filed the instant
complaint against Rexair in the district court, alleging breach
of contract and seeking declaratory relief. Specifically, the
complaint alleged that Rexair breached the parties’ settlement
agreement by filing “a Complaint in Portugal against an
agent/employee of Saltiel, namely: Vilarinho, alleging various
violations of the same or corresponding Rexair trademarks
which were at issue” in the parties’ underlying dispute. The
complaint requested a declaratory judgment providing, among
other things, that the district court “has exclusive and
continuing jurisdiction over Saltiel, Hidrofiltros and Rexair
for purposes of enforcing Rexair’s trademark(s) against
Saltiel and Hidrofiltros and others as defined in ¶¶ 2a and 2c
of the Settlement Agreement and to resolve any and all
disputes which may arise between Saltiel, Hidrofiltros and
Rexair only with respect to such trademark(s).”
On May 23, the district court granted Rexair’s motion to
dismiss the complaint, holding that the settlement agreement
“clearly does not require Rexair to bring a trademark suit in
this Court and indeed Rexair could not have brought a
trademark case, based on Portuguese trademark law against
Vilarinho, a Portuguese national and owner of a Portuguese
company, in this Court under the [settlement agreement].”
6 Hidrofiltros, et al. v. Rexair No. 02-1823
The district court also reasoned that paragraphs 2a and 3
“simply mean that should Saltiel and Hidrofiltros, or its
agents, employees, or affiliates be found (in any court of
competent jurisdiction) to have infringed Rexair’s trademarks,
then Rexair may come to this Court and sue Saltiel and
Hidrofiltros for breach of the [settlement agreement] for
having violated ¶ 2a.”
Rexair argues that this appeal is frivolous and has,
accordingly, filed a motion for sanctions against Saltiel and
Hidrofiltros, along with their counsel, pursuant to Federal
Rule of Appellate Procedure 38 and 28 U.S.C. §§ 1912 and
1927.
II. ANALYSIS
We review de novo a district court’s dismissal of a
complaint for failure to state a claim on which relief can be
granted. Theobald v. Bd. of Cty. Comm’rs, 332 F.3d 414, 415
(6th Cir. 2003). While we must consider as true the well-
pleaded allegations of the complaint and construe them in the
light most favorable to the plaintiff, we need not accept as
true legal conclusions or unwarranted factual inferences. See
Booker v. GTE.net LLC, No. 02-6190, 2003 WL 22967930,
at * 2 (Dec. 5, 2003). Under Michigan law, which applies in
this diversity case, we must enforce the terms of the
settlement agreement as written, “interpreting the
unambiguous language in its plain and easily understood
sense.” Gelman Sciences, Inc. v. Fidelity and Cas. Co. of
New York, 572 N.W.2d 617, 623 (Mich. 1998) (citing Upjohn
Co. v. New Hampshire Ins. Co., 476 N.W.2d 392, 397 (Mich.
1991)). “If the contract terms are not ambiguous, then
contradictory inferences that may be drawn are subjective and
irrelevant.” Pierson Sand & Gravel, Inc. v. Pierson Twp.,
851 F. Supp. 850, 858 (W.D. Mich. 1994) (citation omitted),
aff’d, 89 F.3d 835 (6th Cir. 1996). We believe, and the
parties agree, that the settlement agreement is unambiguous.
Therefore, we are bound to enforce the plain meaning of its
terms.

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No. 02-1823 Hidrofiltros, et al. v. Rexair 7
Saltiel and Hidrofiltros argue that the settlement agreement
contains an explicit promise by Rexair to forbear the initiation
of foreign trademark litigation against them or their agents or
affiliates in any forum other than the district court for the
Eastern District of Michigan, and that Rexair has breached
that promise by filing suit in Portugal. Specifically, they
contend that Rexair’s Portuguese lawsuit was brought “for
purposes of enforcing” paragraph 2a of the settlement
agreement because it sought to prevent an individual
“affiliated with Saltiel” from infringing Rexair’s trademarks.
Because paragraph 3 provides that the district court retains
“exclusive” jurisdiction over the parties “for purposes of
enforcing” the settlement agreement, Saltiel and Hidrofiltros
claim that Rexair breached the settlement agreement by filing
its lawsuit outside of that forum.
We disagree. Contrary to the assertion of Saltiel and
Hidrofiltros, the settlement agreement is completely silent as
to Rexair’s ability to file a lawsuit in any forum it chooses for
purposes other than enforcing the agreement. While
paragraph 3 contemplates that the district court possesses
“exclusive” jurisdiction over the parties “for purposes of
enforcing” the settlement agreement, neither paragraph 2a nor
any other provision of the agreement prohibits Rexair from
pursuing other remedies that it may have in any appropriate
forum. Rexair’s Portuguese lawsuit was by no means brought
“for purposes of enforcing” the parties’ settlement agreement.
Rather, the purpose of the Portuguese lawsuit was to prevent
Vilarinho from violating Portuguese law by infringing
Rexair’s trademarks. Rexair sought to enjoin Vilarinho from
selling the infringing products, not to recover any damages
from Saltiel or Hidrofiltros for breach of the settlement
agreement or to force them to comply with its terms.
Had the parties intended to place additional restrictions
upon Rexair’s right to pursue legal remedies, they certainly
could have drafted their settlement agreement accordingly.
As written, however, the settlement agreement simply cannot
be interpreted as limiting Rexair’s rights in the manner
8 Hidrofiltros, et al. v. Rexair No. 02-1823
2Counsel for Saltiel and H idrofiltros has argued that we should
remand this case to the district court for an evidentiary hearing on the
issue of whether Vilarinho was “affiliated with Saltiel” within the
meaning of paragraph 2a. That issue is irrelevant, however, given our
con clusion that Rexair’s Portuguese lawsuit was not brought “for
purposes of enforc ing” the settlement agreement and, hence, could not fall
within any “exclusive” jurisdiction that the Eastern District of Michigan
may have possessed by virtue of paragraph 3.
suggested by Saltiel and Hidrofiltros. Because Rexair’s
Portuguese lawsuit was not brought “for purposes of
enforcing” the settlement agreement, the claims asserted in
that lawsuit do not fall within any “exclusive” jurisdiction
that the Eastern District of Michigan may possess. Therefore,
Rexair did not breach the settlement agreement by filing its
Portuguese lawsuit.2
With respect to Rexair’s motion for sanctions, while we
certainly believe that the time and resources of the parties and
the Court would have been better spent on matters other than
this appeal, we nevertheless find that the circumstances do not
warrant the imposition of sanctions against Saltiel or
Hidrofiltros, or their counsel.
For the foregoing reasons, the district court’s judgment is
AFFIRMED and Rexair’s motion for sanctions is DENIED.

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