Lucky Brand vs. Marcel Fashions Group: Trademark Infringement and Defense Preclusion, Study notes of Law

Download Lucky Brand vs. Marcel Fashions Group: Trademark Infringement and Defense Preclusion and more Study notes Law in PDF only on Docsity! 1 (Slip Opinion) OCTOBER TERM, 2019 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. SUPREME COURT OF THE UNITED STATES Syllabus LUCKY BRAND DUNGAREES, INC., ET AL. v. MARCEL FASHIONS GROUP, INC. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT No. 18–1086. Argued January 13, 2020—Decided May 14, 2020 Petitioners (collectively Lucky Brand) and respondent (Marcel) both use the word “Lucky” as part of their marks on jeans and other apparel. Marcel received a trademark registration for the phrase “Get Lucky,” and Lucky Brand uses the registered trademark “Lucky Brand” and other marks with the word “Lucky.” This has led to nearly 20 years of litigation, proceeding in three rounds. The first round resulted in a 2003 settlement agreement in which Lucky Brand agreed to stop using the phrase “Get Lucky” and Marcel agreed to release any claims re- garding Lucky Brand’s use of its own trademarks. In the second round (2005 Action), Lucky Brand sued Marcel and its licensee for violating its trademarks. Marcel filed several counterclaims turning, as rele- vant here, on Lucky Brand’s alleged continued use of “Get Lucky,” but it did not claim that Lucky Brand’s use of its own marks alone in- fringed the “Get Lucky” mark. In both a motion to dismiss the coun- terclaims and an answer to them, Lucky Brand argued that the coun- terclaims were barred by the settlement agreement, but it did not invoke that defense later in the proceedings. The court in the 2005 Action permanently enjoined Lucky Brand from copying or imitating Marcel’s “Get Lucky” mark, and a jury found against Lucky Brand on Marcel’s remaining counterclaims. In the third round (2011 Action), Marcel sued Lucky Brand for continuing to infringe the “Get Lucky” mark, but it did not reprise its 2005 allegation about Lucky Brand’s use of the “Get Lucky” phrase. After protracted litigation, Lucky Brand moved to dismiss, arguing—for the first time since early in the 2005 Action—that Marcel had released its claims in the settlement agreement. Marcel countered that Lucky Brand could not invoke the release defense because it could have pursued that defense in the 2005 2 LUCKY BRAND DUNGAREES, INC. v. MARCEL FASHIONS GROUP, INC. Syllabus Action but did not. The District Court granted Lucky Brand’s motion to dismiss. The Second Circuit vacated and remanded, concluding that “defense preclusion” prohibited Lucky Brand from raising an unliti- gated defense that it should have raised earlier. Held: Because Marcel’s 2011 Action challenged different conduct—and raised different claims—from the 2005 Action, Marcel cannot preclude Lucky Brand from raising new defenses. Pp. 6–12. (a) This case asks whether so-called “defense preclusion” is a valid application of res judicata: a term comprising the doctrine of issue pre- clusion, which precludes a party from relitigating an issue actually de- cided in a prior action and necessary to the judgment, and the doctrine of claim preclusion, which prevents parties from raising issues that could have been raised and decided in a prior action. Any preclusion of defenses must, at a minimum, satisfy the strictures of issue preclu- sion or claim preclusion. See, e.g., Davis v. Brown, 94 U. S. 423, 428. Here, issue preclusion does not apply, so the causes of action must share a “common nucleus of operative fact[s]” for claim preclusion to apply, Restatement (Second) of Judgments §24, Comment b, p. 199. Pp. 6–8. (b) Because the two suits here involved different marks and differ- ent conduct occurring at different times, they did not share a “common nucleus of operative facts.” The 2005 claims depended on Lucky Brand’s alleged use of “Get Lucky.” But in the 2011 Action, Marcel alleged that the infringement was Lucky Brand’s use of its other marks containing the word “Lucky,” not any use of “Get Lucky” itself. The conduct in the 2011 Action also occurred after the conclusion of the 2005 Action. But claim preclusion generally “ ‘does not bar claims that are predicated on events that postdate the filing of the initial com- plaint,’ ” Whole Woman’s Health v. Hellerstedt, 579 U. S. ___, ___, be- cause events occurring after a plaintiff files suit often give rise to new “operative facts” creating a new claim to relief. Pp. 8–10. (c) Marcel claims that treatises and this Court’s cases support a ver- sion of “defense preclusion” that extends to the facts of this case. But none of those authorities describe scenarios applicable here, and they are unlikely to stand for anything more than that traditional claim or issue preclusion principles may bar defenses raised in a subsequent suit—principles that do not bar Lucky Brand’s release defense here. Pp. 10–12. 898 F. 3d 232, reversed and remanded. SOTOMAYOR, J., delivered the opinion for a unanimous Court. 3 Cite as: 590 U. S. ____ (2020) Opinion of the Court see id., at 34–41. None of Marcel’s counterclaims alleged that Lucky Brand’s use of its own marks alone—i.e., inde- pendent of any alleged use of “Get Lucky”—infringed Mar- cel’s “Get Lucky” mark. Lucky Brand moved to dismiss the counterclaims, alleg- ing that they were barred by the release provision of the settlement agreement. After the District Court denied the motion without prejudice, Lucky Brand noted the release defense once more in its answer to Marcel’s counterclaims. But as the 2005 Action proceeded, Lucky Brand never again invoked the release defense. The 2005 Action concluded in two phases. First, as a sanction for misconduct during discovery, the District Court concluded that Lucky Brand violated the settlement agreement by continuing to use “Get Lucky” and perma- nently enjoined Lucky Brand from copying or imitating Marcel’s “Get Lucky” mark. Order Granting Partial Sum- mary Judgment and Injunction in No. 1:05–cv–06757, Doc. 183; see also App. 203–204. The injunction did not enjoin, or even mention, Lucky Brand’s use of any other marks or phrases containing the word “Lucky.” Order Granting Par- tial Summary Judgment and Injunction, Doc. 183. The case then proceeded to trial. The jury found against Lucky Brand on Marcel’s remaining counterclaims—those that al- leged infringement from Lucky Brand’s continued use of the “Get Lucky” catchphrase alongside its own marks. See Brief for Respondent 52. C In April 2011, the third round of litigation began: Marcel filed an action against Lucky Brand (2011 Action), main- taining that Lucky Brand continued to infringe Marcel’s “Get Lucky” mark and, in so doing, contravened the judg- ment issued in the 2005 Action. This complaint did not reprise Marcel’s earlier allegation (in the 2005 Action) that Lucky Brand continued to use the 4 LUCKY BRAND DUNGAREES, INC. v. MARCEL FASHIONS GROUP, INC. Opinion of the Court “Get Lucky” phrase. Marcel argued only that Lucky Brand’s continued, post-2010 use of Lucky Brand’s own marks—some of which used the word “Lucky”—infringed Marcel’s “Get Lucky” mark in a manner that (according to Marcel) was previously found infringing.1 Marcel requested that the District Court enjoin Lucky Brand from using any of Lucky Brand’s marks containing the word “Lucky.” The District Court granted Lucky Brand summary judg- ment, concluding that Marcel’s claims in the 2011 Action were essentially the same as its counterclaims in the 2005 Action. But the Court of Appeals for the Second Circuit disa- greed. 779 F. 3d 102. The court concluded that Marcel’s claims in the 2011 Action were distinct from those it had asserted in the 2005 Action, because the claims at issue in the 2005 Action were “for earlier infringements.” Id., at 110. As the court noted, “[w]inning a judgment . . . does not deprive the plaintiff of the right to sue” for the defendant’s “subsequent similar violations.” Id., at 107. The Second Circuit further rejected Marcel’s request to hold Lucky Brand in contempt for violating the injunction issued in the 2005 Action. The court noted that the conduct at issue in the 2011 Action was Lucky Brand’s use of its own marks—not the use of the phrase “Get Lucky.” By contrast, the 2005 injunction prohibited Lucky Brand from using the “Get Lucky” mark—not Lucky Brand’s own marks that hap- pened to contain the word “Lucky.” Id., at 111. Moreover, the court reasoned that the jury in the 2005 Action had been —————— 1 See Complaint for Injunctive Relief and Trademark Infringement in No. 1:11–cv–05523 (SDNY), Doc. 1, ¶15 (“Despite the entry of the [2005 Action judgment], [Lucky Brand] ha[s] continued to willfully . . . infringe [Marcel’s] GET LUCKY mark by using the Lucky Brand marks in the identical manner and form and on the same goods for which [it] w[as] found liable for infringement”); id., ¶20 (“Despite the entry of the” 2005 Action judgment, Lucky Brand has “continued its uninterrupted and willful use of the Lucky Brand marks and any other trademarks includ- ing the word ‘Lucky’ ”). 5 Cite as: 590 U. S. ____ (2020) Opinion of the Court “free to find infringement of Marcel’s ‘Get Lucky’ mark based solely on Lucky Brand’s use of [the phrase] ‘Get Lucky.’ ” Id., at 112. The court vacated and remanded for further proceedings. On remand to the District Court, Lucky Brand moved to dismiss, arguing—for the first time since its motion to dis- miss and answer in the 2005 Action—that Marcel had re- leased its claims by entering the settlement agreement. Marcel countered that Lucky Brand was precluded from in- voking the release defense, because it could have pursued the defense fully in the 2005 Action but had neglected to do so. The District Court granted Lucky Brand’s motion to dis- miss, holding that it could assert its release defense and that the settlement agreement indeed barred Marcel’s claims. The Second Circuit vacated and remanded, concluding that a doctrine it termed “defense preclusion” prohibited Lucky Brand from raising the release defense in the 2011 Action. 898 F. 3d 232 (2018). Noting that a different cate- gory of preclusion—issue preclusion—may be wielded against a defendant, see Parklane Hosiery Co. v. Shore, 439 U. S. 322 (1979), the court reasoned that the same should be true of claim preclusion: A defendant should be pre- cluded from raising an unlitigated defense that it should have raised earlier. The panel then held that “defense pre- clusion” bars a party from raising a defense where: “(i) a previous action involved an adjudication on the merits”; “(ii) the previous action involved the same parties”; “(iii) the de- fense was either asserted or could have been asserted, in the prior action”; and “(iv) the district court, in its discre- tion, concludes that preclusion of the defense is appropri- ate.” 898 F. 3d, at 241. Finding each factor satisfied in this case, the panel vacated the District Court’s judgment. We granted certiorari, 588 U. S. ___ (2019), to resolve differ- ences among the Circuits regarding when, if ever, claim 8 LUCKY BRAND DUNGAREES, INC. v. MARCEL FASHIONS GROUP, INC. Opinion of the Court same” in the two suits—that is, where they share a “ ‘com- mon nucleus of operative fact[s].’ ” Brief for Respondent 2, 27, 31, 50; accord, Reply Brief 3. B Put simply, the two suits here were grounded on different conduct, involving different marks, occurring at different times. They thus did not share a “common nucleus of oper- ative facts.” Restatement (Second) §24, Comment b, at 199. To start, claims to relief may be the same for the purposes of claim preclusion if, among other things, “ ‘a different judgment in the second action would impair or destroy rights or interests established by the judgment entered in the first action.’ ” Wright & Miller §4407. Here, however, the 2011 Action did not imperil the judgment of the 2005 Action because the lawsuits involved both different conduct and different trademarks. In the 2005 Action, Marcel alleged that Lucky Brand in- fringed Marcel’s “Get Lucky” mark both by directly imitat- ing its “Get Lucky” mark and by using the “Get Lucky” slo- gan alongside Lucky Brand’s other marks in a way that created consumer confusion. Brief for Respondent 52. Mar- cel appears to admit, thus, that its claims in the 2005 Action depended on Lucky Brand’s alleged use of “Get Lucky.” Id., at 9–10 (“Marcel’s reverse-confusion theory [in the 2005 Ac- tion] depended, in part, on Lucky’s continued imitation of the GET LUCKY mark”). By contrast, the 2011 Action did not involve any alleged use of the “Get Lucky” phrase. Indeed, Lucky Brand had been enjoined in the 2005 Action from using “Get Lucky,” and in the 2011 Action, Lucky Brand was found not to have violated that injunction. 779 F. 3d, at 111–112. The parties thus do not argue that Lucky Brand continued to use “Get Lucky” after the 2005 Action concluded, and at oral argu- ment, counsel for Marcel appeared to confirm that Marcel’s claims in the 2011 Action did not allege that Lucky Brand 9 Cite as: 590 U. S. ____ (2020) Opinion of the Court continued to use “Get Lucky.” Tr. of Oral Arg. 46. Instead, Marcel alleged in the 2011 Action that Lucky Brand com- mitted infringement by using Lucky Brand’s own marks containing the word “Lucky”—not the “Get Lucky” mark it- self. Plainly, then, the 2011 Action challenged different conduct, involving different marks. Not only that, but the complained-of conduct in the 2011 Action occurred after the conclusion of the 2005 Action. Claim preclusion generally “does not bar claims that are predicated on events that postdate the filing of the initial complaint.” Whole Woman’s Health v. Hellerstedt, 579 U. S. ___, ___ (2016) (slip op., at 12) (internal quotation marks omitted); Lawlor v. National Screen Service Corp., 349 U. S. 322, 327–328 (1955) (holding that two suits were not “based on the same cause of action,” because “[t]he conduct pres- ently complained of was all subsequent to” the prior judg- ment and it “cannot be given the effect of extinguishing claims which did not even then exist and which could not possibly have been sued upon in the previous case”). This is for good reason: Events that occur after the plaintiff files suit often give rise to new “[m]aterial operative facts” that “in themselves, or taken in conjunction with the antecedent facts,” create a new claim to relief. Restatement (Second) §24, Comment f, at 203; 18 J. Moore, D. Coquillette, G. Jo- seph, G. Vairo, & C. Varner, Federal Practice §131.22[1], p. 131–55, n. 1 (3d ed. 2019) (citing cases where “[n]ew facts create[d a] new claim”). This principle takes on particular force in the trademark context, where the enforceability of a mark and likelihood of confusion between marks often turns on extrinsic facts that change over time. As Lucky Brand points out, liability for trademark infringement turns on marketplace realities that can change dramatically from year to year. Brief for Petitioners 42–45. It is no surprise, then, that the Second Circuit held that Marcel’s 2011 Action claims were not barred by the 2005 Action. By the same token, the 2005 10 LUCKY BRAND DUNGAREES, INC. v. MARCEL FASHIONS GROUP, INC. Opinion of the Court Action could not bar Lucky Brand’s 2011 defenses. At bottom, the 2011 Action involved different marks, dif- ferent legal theories, and different conduct—occurring at different times. Because the two suits thus lacked a “com- mon nucleus of operative facts,” claim preclusion did not and could not bar Lucky Brand from asserting its settle- ment agreement defense in the 2011 Action. III Resisting this conclusion, Marcel points to treatises and this Court’s cases, arguing that they support a version of “defense preclusion” doctrine that extends to the facts of this case. Brief for Respondent 24–26. But these authori- ties do no such thing. As an initial matter, regardless of what those authorities might imply about “defense preclu- sion,” none of them describe scenarios applicable here. Moreover, we doubt that these authorities stand for any- thing more than that traditional claim- or issue-preclusion principles may bar defenses raised in a subsequent suit— principles that, as explained above, do not bar Lucky Brand’s release defense here. Take, for example, cases that involve either judgment en- forcement or a collateral attack on a prior judgment. Id., at 26–35. In the former scenario, a party takes action to en- force a prior judgment already issued against another; in the latter, a party seeks to avoid the effect of a prior judg- ment by bringing a suit to undo it. If, in either situation, a different outcome in the second action “would nullify the in- itial judgment or would impair rights established in the in- itial action,” preclusion principles would be at play. Re- statement (Second) §22(b), at 185; Wright & Miller §4414. In both scenarios, courts simply apply claim preclusion or issue preclusion to prohibit a claim or defense that would