H.I.S.C., Inc. v. Franmar Int'l Importers, Ltd.

H.I.S.C., INC. and DEPALMA ENTERPRISES, INC., Plaintiffs, v. FRANMAR INTERNATIONAL IMPORTERS, LTD.;MARIA RAJANAYAGAM; and RAVI INDUSTRIES LIMITED, Defendants.

Case No.: 3:16-cv-0480-BEN-WVG

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

FILED: October 23, 2020

October 22, 2020

ORDER ON MOTIONS FOR (1) TREBLE DAMAGES (2) ATTORNEY'S FEES

[ECF Nos. 260, 261]

Before the Court are Defendants Franmar International Importers, Ltd. and Maria Rajanayagam's (collectively, "Defendants") Motion for Treble Damages and Motion for Attorney's Fees and Costs. ECF Nos. 260, 261. Plaintiffs H.I.S.C., Inc. and DePalma Enterprises (collectively, "Plaintiffs") oppose the motions. For the reasons set forth below, the Motion for Treble Damages is denied and the Motion for Attorney's Fees and Costs is granted in part.

I. Background

Following trial, the jury awarded Defendants $265,977.00 for their counterclaim that Plaintiffs committed trade dress infringement in violation of 15 U.S.C. § 1125(a). Verdict, ECF No. 210. On February 22, 2019, the Court entered final judgment on Plaintiffs' claims and Defendants' counterclaims, documenting the award. Judgment, ECF No. 213. Plaintiffs appealed the judgment, and the Ninth Circuit Court of Appeals affirmed both the jury verdict and the Court's denial of request for a new trial on June 23, 2020. Mandate & Order, ECF No. 263. The Court of Appeals also denied Defendants' request for attorney's fees on appeal. Order, ECF No. 262.

Defendants now ask the Court for treble damages based on Plaintiffs' alleged willful infringement of Defendants' trade dress, as well as attorney's fees and costs pursuant to 15 U.S.C. § 1117(a).

II. Legal Standards

A. Treble Damages or Enhanced Damages

Under 15 U.S.C. § 1117(a), a prevailing party may recover (1) the infringing party's profits, (2) damages sustained by the injured party, and (3) the costs of the action. Where the case involves a counterfeit mark, damages are trebled absent extenuating circumstances. 15. U.S.C. § 1117(b). However, even in non-counterfeiting cases such as this, the statute provides that "[i]f the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case." 15 U.S.C. § 1117(a) (emphasis added). The increased monetary award must have a remedial or compensatory purpose and must not be punitive in nature. Id.; see also SkyDive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105, 1114 (9th Cir. 2012).

B. Attorney's Fees

The fee-shifting provisions in the Patent Act, 35 U.S.C. § 285, and the Lanham Act are interpreted in tandem. SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 839 F.3d 1179, 1180 (9th Cir. 2016) (en banc). Thus, in "exceptional cases," the Court "mayaward reasonable attorney's fees to the prevailing party." 15 U.S.C. § 1117(a). Courts examine whether a case is "exceptional" under a "totality of the circumstances test." SunEarth, Inc., 839 F.3d at 1180 (citing Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014). The Court must evaluate a "nonexclusive list of factors, including frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence" in exercising its discretion to award fees. Id. (quoting Octane Fitness) (internal quotations omitted).

III. Analysis

A. Treble Damages

Defendants' motion requests this award be trebled or at least enhanced due to Plaintiffs' allegedly willful infringement. Mot., ECF No. 260, 3.

Plaintiffs object that Defendants' Motion for Treble Damages is untimely. Opp'n, ECF No. 264, 1. Plaintiffs note that while Defendants' initial Motion for Attorney's Fees and Costs was denied without prejudice by the Court pending Plaintiffs' appeal, Defendants did not make a separate Motion for Treble Damages at that time. Id. Instead, the Motion for Treble Damages was filed only after the Court of Appeals issued its mandate, more than sixteen months after the Court entered judgment in this case. Mot., ECF No. 260. Plaintiffs argue the Motion for Treble Damages should be treated as a Motion to Alter or Amend a Judgment pursuant to Federal Rule of Civil Procedure 59(e). Opp'n, ECF No. 264, 1.

While neither party cites cases addressing this issue, the plain language of Rule 59(e) provides that "[a] motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment." Here, the Court entered judgment on February 22, 2019. Judgment, ECF No. 213. Judgment was for the amount awarded by the jury, $267,977.00. Id. While Defendants filed a Motion for Attorney's Fees, Expert Fees, and Costs only eleven days later, they did not file their Motion for Treble Damages until theappeal was completed. ECF No. 221; ECF No. 260. In the instant motion, Defendants plainly seek to alter the Court's judgment to increase the award. Mot, ECF No. 260, 3.

Defendants' response is that they could not file this Motion because the case was stayed on appeal, and that the Motion for Treble Damages does not seek to alter or amend the judgment. Reply, ECF No. 267, 4. These arguments are unpersuasive. Notice of Appeal was not made until May 2, 2019, more than twenty-eight days after the entry of judgment, which left Defendants all the time allowed by Rule 59(e) to make this Motion for the Court to "enter judgment for such sum as the court shall finding to be just, according to the circumstances of the case." 15 U.S.C. § 1117(a). Moreover, the Parties entered a Satisfaction of Judgment on June 3, 2019. ECF No. 246.

Section 1117(a) plainly contemplates adjusting the award based on the circumstances of the case when the Court "enter[s] judgment." Thus, a motion to amend that judgment to request additional compensation must conform with the timeliness requirements of Rule 59(e). In short, Rule 59(e) provides a party twenty-eight days after entry of judgment to seek the upward or downward relief requested under 15 U.S.C. § 1117(a). Defendants' motion does not do so here, and the substantial delay in filing the instant motion results in prejudice to Plaintiffs by forcing them to litigate an issue that the Court squarely put to rest. Even if the motion had been timely, the Court would have exercised its discretion to decline awarding treble damages.

Accordingly, Defendants' Motion for Treble Damages is denied.

B. Attorney's Fees

Section 1117(a) provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). Defendants argue they are the prevailing parties in this case and that the case is exceptional, entitling them to an attorney's fee award. Mot., ECF No. 261, 7. Plaintiffs argue that Defendants are not the prevailing party and that the case is not exceptional, precluding any fee award. Opp'n, ECF No. 265, 3.

The Court first notes that law of the case doctrine does not prohibit the Court from considering an attorney's fee award where appellate attorney's fees were denied by the Court of Appeals. Order, ECF No. 262. Defendants' request for attorney's fees on appeal involved applying Federal Rule of Appellate Procedure 39 to Defendants' claims under 15 U.S.C. § 1117(a). Id. Because the instant motion instead involves attorney's fees before the District Court, the issue is different and the law of the case doctrine does not apply.

Next, the Court finds that Defendants are the prevailing party. The jury found that Plaintiffs committed trade dress infringement and awarded Defendants $265,977.00. Verdict, ECF No. 210, 9. While Plaintiffs argue Defendants did not prevail on other claims involved in this suit, Defendants unquestionably prevailed on their Lanham Act counterclaims that serve as the basis for their request for attorney's fees. See Brighton Collectibles, Inc. v. Coldwater Creek, Inc., No. 06-CV-1848-H-POR, 2009 WL 160235, at *2 (S.D. Cal Jan. 20, 2009) (holding that a jury's finding of trade dress infringement created a prevailing party).

Finally, the Court finds this to be an exceptional case. "[A]n 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." SunEarth Inc. 839 F.3d at 1180 (quoting Octane Fitness, 572 U.S. at 545) (citations omitted). There, "[t]he Court eschewed a precise rule or formula for making these determinations and instructed that equitable discretion should be exercised in light of the considerations we have identified." Id. at 1180-81) (internal quotations and citations omitted).

Here, Plaintiffs had a three-year working relationship with Defendants from which they substantially benefitted. Plaintiffs took the knowledge they acquired from the relationship and not only set up a competing enterprise but attempted to drive Defendants out of business. Defs.' Trial Ex. 319 (an email from Plaintiffs' agent stating "we need to keep the village busy so they don't make [brooms] for [Defendants]"). Plaintiffs'motivation in filing this case, the Court concludes, was not to fairly litigate meritorious claims but an attempt to corner the market for the products at issue. Other courts in this district have found such severe conduct to demonstrate an unreasonable litigation position. See Left Coast Wrestling, LLC v. Dearborn Int'l LLC, No. 17-CV-0466-LAB-NLS, 2018 WL 2328471, at *11 (S.D. Cal. May 23, 2018). The Court agrees with this reasoning, which supports the finding that this case is exceptional. See SunEarth, Inc., 839 F.3d at 1181. Accordingly, the Court exercises its discretion to award attorney's fees.

C. Attorney's Fees Award

Having determined that Defendants are entitled to attorney's...