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denying motion for attorney's fees where, "although plaintiff's Lanham Act claims were meritless, there is little reason to doubt that plaintiff believed it owned trademark rights in the word 'Momentum'"
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00 Civ. 7909 (DLC)
November 8, 2001
For Plaintiff: John P. Bostany, 100 Maiden Lane, New York, N Y 10038.
For Defendant Jansport, Inc.: Thomas A. Canova, Gianni P. Servodidio, Pennie Edmonds LLP, 1155 Avenue of the Americas, New York, N Y 10036-2711.
OPINION AND ORDER
In this case, plaintiff and its counsel misused the discovery process and multiplied motion practice in their prosecution of a baseless lawsuit. On July 23, 2001, the Court granted summary judgment in favor of defendant Jansport, Inc. ("Jansport") and dismissed the claims of plaintiff Momentum Luggage Leisure Bags ("Momentum"). Momentum Luggage Leisure Bags v. Jansport, Inc., No. 00 Civ. 7909, 2001 WL 830667, at *13 (S.D.N.Y. July 23, 2001). Familiarity with the July 23 Opinion is assumed. On August 3, 2001, Jansport re-submitted a prior motion for sanctions against plaintiff and plaintiff's counsel, John P. Bostany ("Bostany"), pursuant to Rule 37, Fed.R.Civ.P., and 28 U.S.C. § 1927. Jansport also supplemented its prior motion by moving for attorney's fees pursuant to 15 U.S.C. § 1117(a). Although there is much to criticize in plaintiff's conduct of this litigation, for the reasons set forth below, Jansport's motion for sanctions and attorney's fees is denied.
BACKGROUND
Momentum is a partnership between Robert Rudko and William Greystone. It filed this action against defendants on October 17, 2000, asserting claims of trademark and trade dress infringement. Plaintiff claims trademark rights in the name "Momentum," which is the name it began to use for its partnership in 1997, and the name used in connection with its one sale of six tote bags and two briefcases in 1999. Plaintiff owns no federal or state trademark registration for the name "Momentum."
In its complaint, plaintiff asserted that it "developed . . . the Momentum trademark to identify a line of luggage and bags, which Momentum has marketed, sold and advertised widely." (Emphasis supplied). It alleged that it "has and continues to prominently display the `Momentum' trade dress and trademark for its Momentum luggage products," and that "Momentum has extensively advertised and promoted the Momentum luggage by its trade dress and trademarks in various media in the United States." (Emphasis supplied). The complaint further alleged that, based on plaintiff's "continuous and exclusive use of the trade dress and trademark, the extensive advertisement and promotion of the luggage sold using its trade dress and trademark, and its sales, the purchasing public has come to associate Momentum as the source and sponsor of the Momentum line of luggage marketed as Momentum luggage." (Emphasis supplied). Plaintiff further alleged that it had distributed its luggage "to wholesalers and retail stores and other stores throughout the United States." (Emphasis supplied). Despite these allegations in its complaint, discovery in this litigation established that plaintiff's use of the "Momentum" mark in connection with anything that could be liberally construed as luggage has consisted of one sale in 1999, of six tote bags and two briefcases and one paid advertisement for a tote bag in 1999, in a trade journal. See Momentum, 2001 WL 830667, at *1-3.
Plaintiff's complaint alleges that the "the Momentum trade dress is the word mark itself used to identify Momentum's line of luggage and bags."
As explained more fully below, certain documents untimely produced by the plaintiff were precluded in this case. Even those documents, however, show only six additional sales in 1999, four of which were to the same customer and none of which were for more than 30 articles. The items sold included a "bowling bag," a "cabin bag," and several tote bags.
Defendant Jansport is one of the world's largest manufacturers of backpacks with annual sales of Jansport branded products of approximately $200 million. Jansport spends about $5 million a year on advertising the Jansport brand in the United States alone. In 1998, Jansport began to develop a new line of nylon luggage and selected the designation "Momentum" as its "collection" name for the new Jansport luggage line in August 1999. Jansport never used the name "Momentum Collection," however, on any of the luggage itself. Nor did it use "Momentum" on any hang tags, point of sale materials, or on anything that would be seen by consumers. The only name that appears on Jansport's luggage or its hang tags for its luggage is "Jansport." Rather, until it was made aware of plaintiff's claim to the "Momentum" name in July 2000, Jansport used the name "Momentum" or "Momentum Collection" in connection with promotional materials — such as a wholesale catalog, purchase order form, CD-Rom, and trade show literature — distributed to its sales representatives and certain members of the luggage trade. The name "Momentum" appeared twice in Jansport's 18-page luggage catalog for the year 2000.
In late July 2000, Robert Rudko left a message with a receptionist at Jansport, claiming that plaintiff owned a business named "Momentum" on Madison Avenue in New York City. After receiving this phone call, Jansport revised its promotional materials for its upcoming December 2000 holiday promotion and for its 2001 luggage line by removing any reference to the designation "Momentum" or "Momentum Collection."
Before bringing this lawsuit, plaintiff did not send Jansport a "cease and desist" letter. Instead, Momentum immediately moved for a temporary restraining order ("TRO") and preliminary injunction, seeking to enjoin Jansport's use of plaintiff's alleged "Momentum" trademark in connection with the promotion of the line of luggage Jansport introduced in 2000.
Plaintiff voluntarily discontinued its claims against Business Journals, Inc. and Luggage Leather Goods Manufacturers of America, Inc.
When the Court declined to grant a TRO at an initial conference on October 19, 2000, plaintiff requested expedited discovery in lieu of a preliminary injunction. Pursuant to the Court's Pretrial Scheduling Order of October 23, 2000, discovery was to be completed by February 23, 2001, and the parties were placed on the April trial ready calendar.
Throughout the discovery period, Momentum delayed responding to the defendant's legitimate discovery requests, putting off for as long as possible revealing its lack of sales and indeed its lack of a business. On the other hand, it used many tactics to make Jansport's defense of this suit as expensive as possible.
Jansport was required to file two motions to compel discovery from plaintiff, to oppose three requests by the plaintiff to send letters to Jansport's customers, and to move to dismiss plaintiff's demand for statutory damages when plaintiff had no legal basis for such damages, among other things. A brief history of the proceedings will help to place the instant motion in context.
Depositions of Jansport Witnesses
The Court denied plaintiff's request to require three witnesses of the defendant to travel from the corporate headquarters in Wisconsin to New York for their depositions, or to require the defendant to pay the expenses of Bostany to travel to Wisconsin to take the depositions. Thereafter, these depositions were rescheduled three times to accommodate plaintiff. Finally, at a conference on January 26, 2001, the Court ordered that the depositions of these witnesses would go forward on February 8 and 9, or plaintiff would waive its right to take them. On February 5, three days before the rescheduled depositions were to take place, Bostany notified defendant's counsel that he would not be taking the depositions, thereby waiving plaintiff's right to take those depositions.
Letters to Jansport's Customers
Another contested issue in this case concerned plaintiff's numerous requests to send letters to customers of Jansport. In mid-November, Jansport sent a letter to every customer engaged in resale and requested that no use be made of the "Momentum" name. Although plaintiff had agreed to the form and substance of this letter at a November 7 settlement conference before Magistrate Judge Katz, it nonetheless made three separate requests to write its own letters to Jansport's customers to advise them of this lawsuit and their potential liability for their use of the name "Momentum" without plaintiff's permission. The Court denied each of these requests because plaintiff had not shown any current or ongoing use of the "Momentum" name by Jansport's customers to justify its proposed massive letter-writing campaign.
Moreover, Jansport repeatedly stated that it was willing to contact any customers that plaintiff could demonstrate were referring to "Momentum" to remind them to stop.
Amended Complaint
In addition to its attempt to send letters to Jansport's customers, Momentum filed an amended complaint without leave on December 20, 2000, adding seven additional defendants who were customers of Jansport. Momentum then sought leave nunc pro tunc to amend the complaint. Jansport opposed the amendment. The Court denied Momentum's request to amend the complaint. Momentum Luggage Leisure Bags v. Jansport, Inc., No. 00 Civ. 7909, 2001 WL 58000, at *3 (S.D.N.Y. Jan. 23, 2001).
Plaintiff's Document Requests
The burden of discovery in this case fell almost entirely on Jansport. In plaintiff's first request for documents, dated October 24, 2000, it requested, among other things, any and all documents, invoices, and purchase orders relating to Jansport's use of the name "Momentum." At a conference on January 4, 2001, plaintiff complained that Jansport had not produced all of its invoices and purchase orders, but instead, had produced summary information, which included the invoice number, number of units sold, the dollar amount for each item, and the aggregate dollar amount. Jansport had also produced sample invoices and purchase orders.
In light of the burdensome nature of plaintiff's request and its limited relevance, the Court asked Bostany the amount of plaintiff's sales for the year 2000. Bostany replied that he did not know whether there were any sales, but imagined there were. Following Bostany's inability to represent the amount of plaintiff's sales, the Court denied his request for Jansport's invoices and purchase orders.
On January 31, plaintiff served 33 additional discovery requests on Jansport. Jansport did not respond to these requests and instead brought its motion for summary judgment.
Motions to Compel Discovery and Preclude Evidence
While complaining that Jansport had failed to produce sufficient discovery, plaintiff delayed its own production of documents for over a month. After plaintiff failed to comply with Jansport's November 8, 2000 Interrogatories and Document Requests, Jansport filed two separate motions to compel discovery. The Court granted both motions. In granting Jansport's second motion to compel, the Court ordered plaintiff to produce all documents responsive to six Jansport document requests by January 11. On January 11, plaintiff produced certain sales information, including a few invoices and a purchase order.
On January 16, Jansport filed a request to preclude any documentary evidence received after January 11. After Jansport filed its request for partial preclusion, plaintiff produced additional responsive documents, including sales records and a "potential customer" contact list. At a January 26 conference held to address Jansport's request for partial preclusion as well as other discovery disputes, plaintiff offered no valid justification for not producing the requested documents by January 11, or within the months following the November 8 document request. On January 31, the Court granted Jansport's request to preclude any documentary evidence produced by Momentum after January 11. Momentum Luggage Leisure Bags v. Jansport, Inc., No. 00 Civ. 7909, 2001 WL 91707, at *2 (S.D.N.Y. Feb. 1, 2001).
The Court declined at the January 26 conference to impose monetary sanctions.
Statutory Damages
Yet another issue that was resolved through motion practice concerned plaintiff's Lanham Act claim for statutory damages of one million dollars. On December 22, 2000, Jansport moved to dismiss this claim pursuant to Rule 12(b)(6), Fed.R.Civ.P. Momentum opposed the motion. On February 16, 2001, the Court dismissed Momentum's claim for statutory damages. Momentum Luggage Leisure Bags v. Jansport, Inc., No. 00 Civ. 7909, 2001 WL 135702, at *1 (S.D.N.Y. Feb. 16, 2001). Section 35(c) of the Lanham Act provides for statutory damages of up to one million dollars in cases involving the use of a counterfeit of a federally registered trademark. 15 U.S.C. § 1117(c); 15 U.S.C. § 1116(d)(1)(B)(i). Momentum does not own and has not alleged ownership of a federal trademark registration for the designation Momentum. Plaintiff offered no legal authority for its position that an alleged owner of an unregistered mark could maintain a Lanham Act claim for statutory damages of one million dollars. Id. at *1-2.
Summary Judgment
On February 6, 2001, Jansport moved to dismiss this action under Rule 37(b)(2)(C), Fed.R.Civ.P., and for costs and attorney's fees under 28 U.S.C. § 1927. On February 12, Momentum filed a motion for leave to file a second amended complaint, withdrawing allegations of its "substantial sales" "throughout the country" and "extensive use and promotion" and "substantial goodwill" of its alleged trademark. At a conference on February 15, Jansport stated that it wished to bring a motion for summary judgment. All pending motions were stayed while the parties briefed the summary judgment motion. On July 23, the Court granted summary judgment in favor of Jansport, and allowed it to re-submit or supplement its February 6 motion for sanctions and attorney's fees. This motion followed.
DISCUSSION
Jansport moves for sanctions against plaintiff and plaintiff's counsel pursuant to Rule 37, Fed.R.Civ.P., and 28 U.S.C. § 1927, and moves for attorney's fees and costs to be assessed against plaintiff and plaintiff's counsel pursuant to 15 U.S.C. § 1117(a).
Rule 37
Jansport first re-submits its motion for contempt and for costs and fees pursuant to Rule 37, Fed.R.Civ.P., based on Momentum's failure to comply with discovery orders. Specifically, Jansport argues that plaintiff failed to comply with a December 21 Order granting Jansport's first request to compel discovery and requiring plaintiff to produce documents by December 26. Jansport further argues that plaintiff failed to comply with a January 4 Order granting Jansport's second request to compel discovery and requiring plaintiff to produce documents by January 11.
As discussed above, on January 31, 2001, the Court precluded Momentum from introducing any documentary evidence produced after January 11. While Momentum's attempt to produce and argue from material produced after January 11 was not "substantially justified," Fed.R.Civ.P. 37(b)(2), the Order of preclusion was an adequate sanction for Momentum's failure to comply with discovery requests and the Court's Orders. An additional monetary sanction under Rule 37 is not necessary. See, e.g., Hollingsworth v. City of New York, No. 95 Civ. 3738 (RWS), 1997 WL 91286, at *2 (S.D.N.Y. Mar. 4, 1997) (application and choice of sanctions is within the sound discretion of the court).
The documents were few in number — reflecting some of the plaintiff's very limited sales and a "wish list" of potential customers, a list purportedly compiled by taking names and addresses off business cards collected at trade shows. Further, these documents did not establish any significant pattern of sales of luggage or bags marketed under the trade name "Momentum" or reflect any advertising or promotional campaign. The invoices showed six sales in 1999, four of which are to the same customer, of items which could arguably fall within the category of luggage or bags. No order was for more than 30 articles. See Momentum, 2001 WL 830667, at *13.
18 U.S.C. § 1927
Jansport also moves for sanctions against plaintiff's counsel pursuant to 28 U.S.C. § 1927 ("Section 1927"). Section 1927 states that an attorney "who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. While the district court has discretion in awarding sanctions, it must find "clear evidence that (1) the offending party's claims were entirely without color, and (2) the claims were brought in bad faith — that is, `motivated by improper purposes such as harassment or delay.'" Eisemann v. Greene, 204 F.3d 393, 396 (2d Cir. 2000) (citation omitted). This bad faith standard has been interpreted "restrictively" by the Second Circuit, and judges must make their decisions to impose sanctions "`with restraint and discretion.'" Id. (citation omitted).
Here, Bostany multiplied the proceedings in this case in several ways. As outlined above, he made repeated requests for Jansport's confidential nationwide customer lists with no evidence of ongoing use by Jansport of the "Momentum" mark or virtually any sales by his own client, much less nationwide sales. He opposed Jansport's motion to dismiss the statutory damages claim without any legal authority for his position. Further, he attempted to add seven customers of Jansport as defendants in an amended complaint through allegations which irresponsibly and falsely described an extensive business by the plaintiff. Perhaps most importantly, Bostany concealed as long as possible the falsity of the claims made in the original complaint by delaying production of plaintiff's own documents, thereby inviting Jansport's two motions to compel discovery and its motion to preclude untimely produced documentary evidence.
Both Jansport and the Court were burdened with these disputes, among others. Countless hours and resources have been spent trying to resolve matters based on the erroneous assumption that the claims in the plaintiff's complaint were grounded in fact and entitled to a hearing. Not only were these proceedings unnecessarily multiplied, but Momentum's claims were also "entirely without color." Id.
As set forth in the July 23 Opinion granting Jansport summary judgment, plaintiff has no common law trademark rights in the word "Momentum". Momentum, 2001 WL 830667, at *6. Although the plaintiff asserted in its complaint that it had continuously exploited the "Momentum" mark since February 1999, in connection with luggage, it had advertised a tote bag once and had shown one sale of six tote bags and two briefcases. Plaintiff's de minimus advertising and sales activity do not constitute sufficient use of a trademark in commerce to qualify for protection under the Lanham Act. Id. at *6-7. Moreover, plaintiff could not expect to show that Jansport's use of the word "Momentum" in its literature to the trade was likely to cause confusion with any use plaintiff ever made of the mark "Momentum." Id. at *7.
Nor would plaintiff have been able to prove common law ownership of the "Momentum" mark through the use of the few sales invoices which were precluded by the January 31 Memorandum Opinion. See supra at n. 7.
While plaintiff's claims were baseless, there is insufficient evidence that the claims were brought in bad faith. "`Bad faith is the touchstone of an award under [Section 1927].'" Revson v. Cinque Cinque, P.C., 221 F.3d 71, 79 (2d Cir. 2000) (citation omitted).
It is true that there is reason to believe that plaintiff filed this lawsuit not to protect its trademark rights, but to induce Jansport to settle this case before it could discover that plaintiff had no trademark rights. Instead of being candid with the Court and opposing counsel regarding the extent of plaintiff's business, Bostany engaged in obfuscation. For example, on January 4, 2001 — after numerous discovery disputes and conferences, and more than two months after filing the complaint and requesting first a TRO and then expedited discovery — plaintiff's counsel responded to questions about the volume of plaintiff's sales by answering that he did not know whether there were sales but "imagine[d] there were." At best, Bostany was unprofessional in filing and then continuing this lawsuit without knowing the extent of his client's business. At worst, plaintiff's counsel misled the defendant and the Court and caused much time, energy, and money to be spent litigating baseless claims.
In defense of his conduct, Bostany itemizes the number of times he contends he was effective in convincing his client to pursue a course of litigation that saved Jansport expense and burden. Bostany cites the following as examples of his efforts to conserve resources and expedite the litigation: (1) withdrawing the preliminary injunction motion; (2) dismissing Business Journals, Inc. and Luggage Leather Goods Manufacturers of America, Inc. as defendants; (3) extending Jansport's time for responding to plaintiff's discovery requests; (4) convincing plaintiff to withdraw its objections to Jansport's document requests and interrogatories; (5) refusing to seek sanctions against Jansport's counsel despite his client's wishes; (6) seeking Court approval before serving subpoenas on three non-parties; (7) waiving the deposition of Jansport's witnesses in Wisconsin; (8) seeking permission to send industry-wide letters to Jansport's customers; and (9) convincing his client not to file multiple lawsuits against Jansport's customers. In addition, Bostany argues that his client, and not he, was responsible for the delays in document production, and contends that Jansport's counsel shares blame for the many difficulties during discovery.
After reviewing Bostany's arguments, the Court is unconvinced that his actions saved Jansport any expense or burden. Any serious, responsible discussion between Bostany and his client would have resulted in a radically revised complaint or no action against Jansport whatsoever. Further, nothing presented by Bostany explains the constant pressuring to obtain Jansport's customer list, which had no connection with this case. The question becomes, however, whether Bostany's conduct was the result of bad lawyering or bad faith. Bostany either did not do an adequate investigation of his client's claims or else he knowingly filed the claims in bad faith against a deep pocket.
Despite the obvious flaws in both the merits of plaintiff's claims as well as the litigation tactics employed by Bostany, there is insufficient evidence that Bostany filed these claims in bad faith to impose sanctions. Nor is it clear that Bostany's actions were "so completely without merit as to require the conclusion that they must have been undertaken for some improper purpose such as delay." Revson, 221 F.3d at 79 (emphasis in original) (quoting Oliveri v. Thompson, 803 F.2d 1265, 1273 (2d Cir. 1986)). In any event, any sanctions imposed would be modest in light of Bostany's solo practice. See, e.g., Oliveri, 803 F.2d at 1281. For both of these reasons, sanctions are not appropriate under Section 1927.
Jansport also moves for sanctions under 15 U.S.C. § 1117(a), jointly and severally against Momentum and Bostany. Pursuant to 15 U.S.C. § 1117(a), a court may award "reasonable attorney fees" to the prevailing party in "exceptional cases." In addition to being confined to exceptional cases, the Second Circuit has held that attorney fees should be awarded "only `on evidence of fraud or bad faith.'" Gordon and Breach Science Publishers S.A. v. American Inst. of Physics, 166 F.3d 438, 439 (2d Cir. 1999) (citation omitted). It "has defined `exceptional circumstances' to include cases where a plaintiff prosecutes an action in bad faith." Banff, Ltd. v. Colberts, Inc., 996 F.2d 33, 36 (2d Cir. 1993). Under 15 U.S.C. § 1117(a), sanctions may be imposed against both plaintiff and its counsel. Motown Prods., Inc. v. Cacomm, Inc., 849 F.2d 781, 786 (2d Cir. 1988). Jansport has requested and submitted proof of attorney's fees totaling $177,175.
In this case, plaintiff brought spurious claims against Jansport. In certain instances, court have inferred bad faith where a plaintiff's Lanham Act claims were baseless. See, e.g., IMAF S.p.A. v. J.C. Penney Co., 26 U.S.P.Q.2d 1667, 1676 (S.D.N.Y. 1992); Diamond Supply Co. v. Prudential Paper Prods., 589 F. Supp. 470, 476 (S.D.N.Y. 1984); Viola Sportswear, Inc. v. Mimun, 574 F. Supp. 619, 621 (E.D.N.Y. 1983). Here, although plaintiff's Lanham Act claims were meritless, there is little reason to doubt that plaintiff believed it owned trademark rights in the word "Momentum." In any event, it was incumbent on Bostany to advise his client that under the applicable law its claims are meritless. Diligent counsel should have warned Momentum that there was no legal support for its lawsuit.
Jansport points out several examples which it contends prove Momentum's bad faith. First, Jansport argues that Robert Rudko's sworn interrogatory answer identifying an actual confusion witness was perjured. Mr. Rudko later corrected this error and conceded that there were no instances of actual confusion. Jansport also argues that Mr. Rudko falsely testified in his March 17, 2001 Affidavit that two people had placed orders for Momentum leather envelopes. While this testimony may have been false, it was not material since plaintiff claimed trademark rights in the name "Momentum" in connection with "luggage and bags."
While a closer question is presented with respect to Bostany's conduct in this case, attorney's fees are not warranted under 15 U.S.C. § 1117(a). The Court does not condone the litigation tactics employed by Bostany throughout this litigation. Jansport was forced to incur significant expense and spend considerable effort to defend against a lawsuit that has continued for nearly a year and lacked a solid legal foundation. Nevertheless, the Court cannot conclude that Bostany's flawed litigation tactics demonstrate an improper purpose. As discussed more fully above, a review of the record does not provide sufficiently conclusive evidence of his bad faith. See Motown Prods., 849 F.2d at 786.
CONCLUSION
For the reasons stated, Jansport's request for attorney's fees and costs is denied.