Landstar Sys., Inc. v. Am. Landstar Logistics Corp.

LANDSTAR SYSTEM, INC., Plaintiff, v. AMERICAN LANDSTAR LOGISTICS CORP., AMERICAN LANDSTAR MOTOR TRANS INC.,f/k/a AMERICAN LANDSTAR TRANSPORT INC.and AMERICAN LANDSTAR TRANSPORTATION INC., Defendants.

15 Civ. 7179 (KAM) (VMS)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

February 6, 2020

REPORT AND RECOMMENDATION

Vera M. Scanlon, United States Magistrate Judge:

Plaintiff Landstar System, Inc. ("Plaintiff" or "Landstar") brought this action against defendants American Landstar Logistics Corp., American Landstar Motor Trans Inc. f/k/a American Landstar Transport Inc., and American Landstar Transportation Inc. (the "Defendants"), alleging, among other things, trademark infringement and false designation of origin under the Lanham Act, 15 U.S.C. §§ 1114 and 1125(a). District Judge Kiyo A. Matsumoto granted summary judgment in favor of Plaintiff. Dkt. Entry 5/31/17; ECF No. 57, Transcript ("Tr."), 38:8-10.

Plaintiff moved for damages, attorneys' fees and costs, and punitive damages (ECF Nos. 75-77), and the motion was referred to the undersigned by District Judge Kiyo A. Matsumoto (Dkt. Entry 10/12/18). This Court issued a report and recommendation recommending that Plaintiff be awarded statutory damages under the Lanham Act, as well as reasonable attorneys' fees and costs. ECF No. 79. The Honorable Matsumoto adopted the report and recommendation with modification as to the amount of statutory damages. ECF No. 81. The Court also directed Plaintiff to submit supporting papers for its motion for attorneys' fees and costs. Id.

Now before this Court on referral is Plaintiff's supplemented motion for attorneys' fees and costs pursuant to 15 U.S.C. § 1117(a). Plaintiff seeks $222,269.00 in attorneys' fees and $6,973.80 in costs, for a total amount of $229,242.80. Defendants have not opposed Plaintiff's motion.

District Judge Kiyo A. Matsumoto referred Plaintiff's motion to this Court for a report and recommendation. Based on Plaintiff's submissions and for the reasons stated below, the Court respectfully recommends that the Plaintiff be awarded $111,549.15 in attorneys' fees and $4,836.63 in costs, for a total of $116,385.78.

I. BACKGROUND AND RELEVANT PROCEDURAL HISTORY

A. The Court Granted Summary Judgment In Plaintiff's Favor

Plaintiff was granted summary judgment on its claims for direct and contributory federal trademark infringement, unfair competition and false designation of origin under Sections 32 and 43(a) of the Lanham Act, 15 U.S.C. §§ 1114 and 1125(a), as well as for New York common law trademark infringement and unfair competition claims.¹ Dkt. Entry 5/31/17; ECF No. 57, Tr. 38:8-10. The Court noted Plaintiff's repeated steps to put Defendants on notice of its objections to Defendants' use of Plaintiff's mark. Tr. 43:3-52:2. The Court further held that Plaintiff's registered mark of "Landstar" is incontestable under 15 U.S.C. § 1165, and that Defendants failed to meet their burden of rebutting the mark's protectability. Tr. 54:2-13. The Court also held that no reasonable jury could find that Defendants' use of Plaintiff's registered mark did notcreate a strong likelihood of confusion. Tr. 71:14-18. The Court concluded that, "[D]efendants willfully ignored [P]laintiff's attempts to warn the [D]efendants of the infringement" upon Plaintiff's registered trademark (Tr. 66:21-24) and that Defendants used Plaintiff's mark in "bad faith" (Tr. 67:14-25, 68:8-13).

B. Plaintiff Was Awarded Statutory Damages, Attorneys' Fees And Costs

Plaintiff moved for damages pursuant to 15 U.S.C. § 1117 seeking trebled actual damages of $31,985,256.51 or $6,000,000.00 in statutory damages. ECF Nos. 75-77. Plaintiff also moved for attorneys' fees and costs, as well as for punitive damages. Id. Defendants did not oppose Plaintiff's motion.

The Court awarded Plaintiff $6,000,000.00 in statutory damages, or $2,000,000.00 as against each defendant. ECF No. 81 at 16. The Court further directed Plaintiff to submit supporting papers for its request for attorneys' fees and costs that includes an itemized list of costs incurred for the litigation and any supporting documentation. Id. at 15-16.

Plaintiff complied with this Order and submitted documents in support of its motion for attorneys' fees and costs as directed by the Court. ECF No. 82. Plaintiff contends it has incurred $6,973.80 in costs. Id. ¶ 7. Plaintiff also contends it has incurred $232,372.50 in attorneys' fees but admits that its time records include duplicate entries which justify lowering the estimate of attorneys' fees to $222,269.00. Id. ¶¶ 17-21.

The Honorable Matsumoto referred Plaintiff's motion for attorneys' fees and costs to this Court for a report and recommendation.

II. DISCUSSION

A. This Is An "Exceptional Case" Warranting Attorneys' Fees And Costs To Plaintiff

The Lanham Act provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). In 2014, the Supreme Court interpreted an identical attorneys' fees provision found in the Patent Act, 35 U.S.C. § 285. See Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014). In Octane Fitness, the Court defined an "exceptional case" as "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." Id. at 554.

This Court previously held that Plaintiff is entitled to an award of attorneys' fees and costs because the District Court's finding that Defendants willfully and in bad faith infringed on Plaintiff's marks made this an "exceptional case" under the then-prevailing standards. ECF No. 79 at 15. To the extent that a party's bad faith and willful infringement are no longer determinative of a plaintiff's entitlement to attorneys' fees under the Lanham Act, this Court will assess the additional factors laid out by the Supreme Court in Octane Fitness, 572 U.S. at 554 n.6 (including "frivolousness, motivation, objective unreasonableness and . . . advanc[ing] considerations of compensation and deterrence"), to determine whether this case qualifies as "exceptional." After considering the totality of the circumstances and applying the Octane Fitness considerations, this Court respectfully recommends that this case remain an "exceptional case."

First, the substantive strength of Plaintiff's litigating position was strong. Plaintiff demonstrated that its registered mark of "Landstar" is incontestable under 15 U.S.C. § 1165. See ECF No. 57, Tr. 54:2-13. Plaintiff submitted evidence of actual confusion between Plaintiff'scompany and Defendants' companies. Tr. 61:10-65:7. Plaintiff also detailed Defendants' continued use of Plaintiff's mark despite multiple cease-and-desist letters and other attempts by Plaintiff to protect the mark. Tr. 43:3-51:24. See, e.g., Next Realty, LLC v. Next Real Estate Partners, 16 Civ. 6327 (JS) (GRB), 2019 WL 1757781, at *5 (Mar. 11, 2019) ("In this case, the evidence of defendants' extensive use of plaintiff's mark, which continued after the commencement of litigation, combined with the default, renders this an exceptional case warranting an award of fees."), R&R adopted, 2019 WL 1758447 (E.D.N.Y. Mar. 26, 2019). Second, Defendants frustrated the litigation process. On November 7, 2017, this Court ordered the parties to conduct damages discovery. ECF No. 69. Still, Defendants failed to engage meaningfully in the damages discovery ordered by the Court. Defendants destroyed or discarded many responsive documents that prevented Plaintiff from obtaining discovery related to damages. ECF No. 77-3, Scher Dec., Ex. C, Def. Responses to Doc. Requests ¶¶ 1-2, 5-9, 11-13, 18, 20-21; ECF No. 77-4, Scher Dec., Ex. D, Def. Responses to Interrogatories ¶ 4. To the extent that Defendants produced responsive documents, they were largely inconsistent and incomplete. See ECF No. 79 at 6-7. For example, Defendants' tax returns showed a taxable revenue of $897,667.00 in 2014, Defendants' "Profit & Loss" statements showed a revenue of $1,188,445.59 in 2014, and Defendants' "Apex Capital Corp Client Summary" documents showed a revenue of $1,642,127.63 in 2014. Compare Scher Decl., Ex. F with Scher Decl., Ex. I and Scher Decl., Ex. J. Third, as noted by District Judge Kiyo A. Matsumoto, Defendants displayed a pattern of noncompliance or misconduct before the Court. ECF No. 81 at 10. After the Court issued a permanent injunction enjoining Defendants from further use of Plaintiff's mark, Defendants continued to use the mark. ECF Nos. 58, 60. On multiple occasions, Defendants made self-serving statements contradicting previous sworn statements, asdemonstrated by Defendants' submissions during summary judgment motion practice. Tr. 28:9-29:18, 41:20-42:23, 44:13-51:1. Defendants also failed to comply with the Court-ordered briefing schedule for Plaintiff's motion for damages. Dkt. Entry 11/7/17 (setting briefing schedule for motion for damages); Dkt. Entry 7/17/18 (granting sua sponte extension of time for Defendants to file opposition to motion for damages).

The record here is rife with evidence of the unreasonable manner in which Defendants litigated the case, only some but not all of which is discussed above. Upon consideration of the totality of the circumstances under the Octane Fitness standard, this Court continues to recommend that this is an "exceptional case" under Section 1117(a) of the Lanham Act.

Although a court may exercise its discretion to deny an award of attorneys' fees and costs, see Lifeguard Licensing Corp. v. Kozak, 371 F. Supp. 3d 114, 129 (S.D.N.Y. 2019) ("The statutory provision is permissive, not prescriptive."), this Court believes an award of attorneys' fees and costs is appropriate here as it furthers the goals of the Lanham Act, including the deterrence of any further willful bad-faith conduct by Defendants or other possible infringers. Th...