Opinion
No: 00 Civ. 9797 (JFK)
August 19, 2002
Jeffrey A. Schwab, Norman S. Beier, Richard L. Crisona, ABELMAN, FRAYNE SCHWAB., New York, NY., Attorneys for Plaintiff.
RICK EDWARDS, INC., Los Angeles, CA., Attorneys for Defendant.
OPINION AND ORDER
Before the Court is the motion of Plaintiff/Counterclaim-defendant Russell-Newman, Inc. ("Russell-Newman") for summary judgment pursuant to Federal Rule of Civil Procedure 56. Plaintiff seeks an order granting judgment in its favor and dismissing the Amended Counterclaims of The RobeWorks, Inc. ("RobeWorks") . Based on the reasons detailed below, plaintiff's motion is granted and defendant's counterclaims are dismissed.
Background
On February 11, 2000, RobeWorks commenced an action in the Central District of California ("the California action") against another robe manufacturer alleging that RobeWorks' trade dress rights in its robes were infringed by that defendant's robe. The district court dismissed the California complaint finding that the use of micro-fiber and terrycloth layers in RobeWorks' robe is functional and not subject to trade dress protection. RobeWorks has appealed that decision to the Ninth Circuit.
The law is clear that ordinarily the pendency of an appeal should not impact the collateral estoppel effect of an otherwise final and valid judgment. Aerogroup Int'l, Inc. v. Shoe Show, Inc., 966 F. Supp. 175, 180 (W.D.N.Y. 1997). The pendency of an appeal is but one factor of many to consider in whether a party had a full and fair opportunity to litigate. Id. at 180 n. 3 (citing Connecticut Gen. Life Ins. Co. v.. Cole, 821 F. Supp. 193, 201 (S.D.N.Y. 1993); see also Macfarlane v. Vill. of Scotia, New York, 86 F. Supp.2d 60, 64-65 (N.D.N.Y. 2000) (pendency of the appeal does not affect the finality of the decision in the California action for purposes of applying collateral estoppel) The pendency of the appeal to the Ninth Circuit of the California decision will not Impact this court's decision. This case may proceed while the California action awaits decision.
This Court has jurisdiction pursuant to 15 U.S.C. § 1125(a) for trade dress infringement, and to 15 U.S.C. § 1125(c) for trade dress dilution. The Court has supplemental jurisdiction over RobeWorks' state law counterclaims under 28 U.S.C. § 1367(a). Venue is proper under 28 U.S.C. § 1391(b).
Plaintiff/Counterclaim-defendant Russell-Newman is a Texas corporation having a place of business in New York State. Defendant/Counterclaimant RobeWorks is a corporation organized and existing under the laws of the State of California having its principal place of business in Los Angeles, California.
Russell-Newman filed this action against RobeWorks on December 28, 2000 seeking a declaration that the robe sold by RobeWorks does not contain any trade dress subject to protection under federal or state law. In its Answer and Counterclaim, RobeWorks asserted claims against Russell-Newman for trade dress infringement, trade dress dilution, and common law unfair competition on the basis that a robe sold by Russell-Newman infringes RobeWorks' rights in the design of its robes. RobeWorks later filed an Amended Answer and Counterclaim which included a detailed list of the features it considers protected.
Russell-Newman now moves for summary judgment on the basis of collateral estoppel arguing that the decision in the California action should be given preclusive effect under the doctrine of collateral estoppel.
DISCUSSION
I. Summary Judgment
A motion for summary judgment may be granted under Fed.R.Civ.P. 56 if the entire record demonstrates that "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The moving party bears the burden of proving that no material facts are in dispute. Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.3d 54, 57 (2d Cir. 1987) . When viewing the evidence, the Court must "assess the record in the light most favorable to the non-movant and . draw all reasonable inferences in its favor." Delaware Hudson Ry. Co. v. Consol. Rail Corp., 902 F.2d 174, 177 (2d Cir. 1990); McLee v. Chrysler Corp., 109 F.3d 130, 134 (2d Cir. 1997). In determining whether a genuine issue of fact has been raised, a court "must resolve all ambiguities and draw all reasonable inferences against the moving party." Donahue, 834 F.3d at 57. Courts should "take care not to abort a genuine factual dispute prematurely and thus deprive a litigant of his day in court." Id. at 55. Once the movant shows that there are no genuine issues of material fact, the opposing party must produce sufficient evidence to permit a reasonable jury to return a verdict in its favor, identifying "specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 248, 256. If the court finds that there are factual disputes regarding material issues, summary judgment is not appropriate. See id. at 249.
II. Collateral Estoppel
In the California action, RobeWorks as plaintiff alleged that the appearance of its robes constituted an inherently distinctive trade dress. The Court ruled for the defendant dismissing RobeWorks' trade dress claims in. their entirety. Russell-Newman contends that this prior decision conclusively determines and should be given preclusive effect; therefore, RobeWorks should not be allowed to relitigate those issues in this Court.
Russell-Newman brought this action seeking a declaration that the robe sold by RobeWorks does not contain any trade dress subject to protection under state or federal law. Plaintiff argues that a comparison of RobeWorks' allegations in the California action and RobeWorks' Amended Counterclaim in this action shows that the supposed elements of RobeWorks' trade dress identified in each are virtually identical.
In the California action, RobeWorks identified ten features it believed were unique to its robes. Eight of those features are present here. In the California action, RobeWorks alleged that "[s]ince 1995, [RobeWorks] has sold distinctive two layered robes having an inner terrycloth layer and an outer layer of micro fiber fabric. These robes have had an outstanding commercial success and have created a valuable goodwill which inures to [RobeWorks'] benefit. [RobeWorks'] two layered robes are sold at many hotels and spas including notably the Bellagio Hotel in Las Vegas, Nevada." Exh. A to Beir Aff. ¶ 6. Here in its Amended Counterclaim, RobeWorks framed the issue in this manner: "Since 1995, RobeWorks has sold distinctive two layered robes having an inner terrycloth layer and an outer layer of micro fiber fabric. The features that as combined make the RobeWorks' robe's overall appearance and design distinctive, constitute its trade dress, have acquired secondary meaning and are not functional" include: shoulder pads; top stitching, shoulder seams; top stitching armhole seam; deep armhole and sleeve; drop shoulder; welt pocket; over length sleeve; double side belt loops; back belt carrier; locker loop; A-line shape; angled edge belt; side seam pockets; microfiber shell or outside fabric; fully lined robe; contrasting fabrics; interfacing or fusing. See Amended Answer and Counterclaim ¶ 19, Exh. C. to Beir Aff.
The doctrine of collateral estoppel is designed to protect litigants "from the burden of relitigating an identical issue . and to promote judicial economy by preventing needless litigation." Whimsicality, Inc. v. Battat, et al., 27 F. Supp.2d 456, 462 (S.D.N.Y. 1998) (citations omitted) . Grounded in principles of due process and fairness, collateral estoppel "also acts to conserve the resources of courts and litigants, reduce inconsistent results, and promote the interest in finality of judgments." Lennon v. Seaman, 99 Civ. 2664, 2002 WL 109525, at *3 (S.D.N.Y. Jan. 28, 2002) (quoting Conte v. Justice, 966 F.2d 1398, 1400 (2d Cir. 1993)). The doctrine "fosters reliance on judicial action by minimizing the possibility of inconsistent decisions." Elmasri v. England, 111 F. Supp.2d 212, 219 (E.D.N.Y. 2000) (quoting Remington Rand Corp. v. Amsterdam-Rotterdam Bank, N.V.., 68 F.3d 1478, 1485 (2d Cir. 1985)).
Collateral estoppel applies "where (1) the issues presented are in substance the same as those resolved in the prior litigation; (2) no controlling facts or legal principles have changed significantly since the prior proceeding; and (3) no special circumstances warrant an exception to the normal rules of preclusion." Whimsicality, 27 F. Supp.2d at 462 (quoting Aerogroup, 966 F. Supp. at 179). The court must also determine that the issue in the prior proceeding was actually litigated and decided, that there was full and fair opportunity to litigate in the prior proceeding, and that the issue previously litigated was necessary to support a valid and final judgment on the merits. State of New York v. Nasso, 202 F.3d 82, 86 (2d Cir. 2000) (quoting NLRB v. Thalbo Corp., 171 F.3d 102, 109 (2d Cir. 1999)); Aerogroup, 966 F. Supp. at 179-80. The party seeking preclusion bears the burden of showing the identity of issues, while the party against whom collateral estoppel is asserted bears the burden of showing the absence of a full and fair opportunity to litigate. Id. (citing Elmasri, 111 F. Supp.2d at 219)
1. Identity of issues. In the California action, RobeWorks claimed that "[t]he design of [its] two layered robe constitutes an inherently distinctive trade dress." Cal. Compl. at ¶ 11; Exh. A to Beir Aff. The California District Court found that "the design feature for which RobeWorks seeks trade dress protection — the outer layer of micro fiber in its Terry/Micro Fiber Robe — has some utilitarian advantage. Thus, this factor weighs in favor of finding that the outer layer of micro fiber is functional." Accordingly, the Court held that RobeWorks was not entitled to trade dress protection of its Terry/Micro Fiber Robe and granted defendant's motion for summary judgment on RobeWorks' trade dress infringement claim. See Exh. B. to Beir Aff.
RobeWorks argues that the issues in the two cases are different and the prior decision should not be given preclusive effect. RobeWorks contends that in the California action the issue was whether the two layers of the robe constituted trade dress; by contrast, in the New York case, the issue is whether the overall appearance and design of the product constitutes trade dress. In RobeWorks' view, the California court did not consider the overall design. They argue that a broader definition is acceptable here because they claim that Russell-Newman infringer copied not only the two layers but the overall design of the RobeWorks' robe.
RobeWorks' claim that the California action only addressed the two layer design is belied by its own submissions in that action. In the California decision, the Court referred to RobeWorks' submission in opposition to the plaintiff's motion for summary judgment which lists the features of the robe design for which RobeWorks sought protection including: shawl collar two layer full length robe; double side belt loops adjust to waist; wide back belt carrier holds belt in position; large lower side seam patch pockets; soft, fully tacked shoulder pads; drop shoulders and deep armholes; closed hem; detail stitching; generously cut, slenderizing A-line shape; available without pockets. See Exh. B. to Beir Aff. at 3 n.l. The inclusion of this description in the court's opinion is evidence of the court's consideration of the overall appearance and design in denying RobeWorks' trade dress claims in the California action. While these particular aspects were not listed in the complaint, they were included in defense of the motion and were part of the record on which the court based its decision. Therefore, RobeWorks cannot argue in good faith that the issues in the two cases are not virtually identical. The issues are "in substance the same." Whimsicality, 27 F. Supp.2d at 462.
RobeWorks notes that in an action for trade dress infringement, the plaintiff is free to define its trade dress and to do so more expansively than was done in the California action. Nonetheless, RobeWorks cannot continuously re-define its trade dress in an attempt to avoid preclusion and flood the courts with litigation until it succeeds. As plaintiff in the California action, RobeWorks had the opportunity to define the trade dress of its robe. While it focused its definition in the complaint on the two layer collar, RobeWorks nonetheless included the overall description in the motion papers and that definition was part of the Court's decision. Under these circumstances, to allow this action to proceed would defeat the goals and objectives of the doctrine of collateral estoppel. Changing the product description from a two layered robe to discussing its overall appearance and design is simply semantics and does not affect the substance of the claims.
RobeWorks relies on Montana v. United States, 440 U.S. 147, 155 (1979), for the proposition that in deciding a motion based on collateral estoppel, the court must consider whether controlling facts or legal principles have changed significantly since the prior litigation and whether other special circumstances warrant an exception to the normal rules of preclusion. RobeWorks' argument that the "controlling facts" differ because the New York trade dress claim differs fundamentally from the California trade dress claim fails.
It is disingenuous for RobeWorks to argue that controlling facts had changed between the filing of these two matters. First, the robe's design, which is the necessary factual predicate on which the trade dress claim is based, has remained constant. Additionally, the actions were filed closely together. RobeWorks filed the California action in February 2000 and Russell-Newman filed this action in December 2000. No controlling facts changed during that time. All that has changed is the way in which the dress was defined by RobeWorks for purposes of litigation reflecting RobeWorks' desire to re-frame its claim to have a better chance of success. This is a change of strategy, not facts.
2. Full and fair opportunity. Russell-Newman contends that RobeWorks had a full and fair opportunity and incentive to litigate vigorously the trade dress issue in the California action. That action was decided in a federal district court after some discovery, the adequacy or scope of which RobeWorks apparently did not challenge. The Court finds that RobeWorks had a full and fair opportunity to litigate the California action. Therefore, it is precluded from relitigating its trade dress claims in this court.
The Court finds that Russell-Newman has met its burden of proving that the issues here are virtually identical. RobeWorks has failed to show that it did not have a full and fair opportunity to litigate this issue. Therefore, plaintiff's summary judgment motion is granted on the basis of collateral estoppel.
II. State Law Claims
RobeWorks filed counterclaims alleging violations of New York's unfair competition law. The Court's jurisdiction over RobeWorks' state law claims was based on supplemental jurisdiction. Under 28 U.S.C. § 1367(a), district courts have supplemental jurisdiction "over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." The district court may, at its discretion, exercise supplemental jurisdiction over state law claims even where it has dismissed all claims over which it had original jurisdiction. See 28 U.S.C. § 1367(c)(3); Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir. 1996).
Nonetheless, it is preferred that the court decline to exercise supplemental jurisdiction when all federal claims have been dismissed. See 87th St. Owners Corp. v. Carnegie Hill-87th St. Corp., 2002 WL 1836758, at *6 (S.D.N.Y.); see also Kavit v. A.L. Stamm Co., 491 F.2d 1176, 1180 (2d Cir. 1974) ("If it appears that the federal claims are subject to dismissal under F.R. Civ. P. 12(b)(6) or could be disposed of on a motion for summary judgment under F.R. Civ. P. 56, the court should refrain from exercising pendent jurisdiction absent exceptional circumstances."). Having granted summary judgment to plaintiff on the basis of collateral estoppel on the trade dress claims, this Court declines to exercise supplemental jurisdiction over the state law claims for unfair competition. No exceptional circumstances present themselves here.
CONCLUSION
Plaintiff's motion for summary judgment is granted in its entirety. Defendant's counterclaims are dismissed. The Court orders this case closed and removed from its active docket.