United Phosphorus, Ltd. v. Midland Fumigant, Inc.

21 F. Supp. 2d 1255, 1998 U.S. Dist. LEXIS 13713, 1998 WL 559605
District Court, D. Kansas·Decided August 28, 1998·No. Civil Action 91-2133-GTV, 95-2267-GTV·Published·Cited by 3 cases

Opinion

*1257 MEMORANDUM AND ORDER

VAN BEBBER, Chief Judge.

This case is before the court on plaintiffs’ motion for attorney fees and expenses (Doc. 362) pursuant to section 35 of the Lanham Act, 15 U.S.C. § 1117(a). For the reasons set forth below, the motion is granted in the amount of $313,133.27. .

I. Background

United Phosphorus, Ltd. (“United”) originally filed this trademark infringement action against Midland Fumigant, Inc. (“Midland”) in April 1991 alleging that Midland had infringed United’s Quick-Phos mark, fraudulently registered a trademark with the United States Patent and Trademark Office, and engaged in unfair competition (case number 91-2133). Although the parties settled the dispute in October 1991, Judge Earl E. O’Connor vacated the settlement agreement in January 1995 after concluding that Midland had not performed according to the terms of the agreement. Five months later, United and its subsidiary, Inventa Corporation (“Inventa”), filed a second lawsuit against Midland, Phos-Fume Chemical Company, Kaw Valley, Inc., and Donald Fox, the president of the three corporations (ease number 95-2267). In the June 1995 case, which the court consolidated with the revived April 1991 suit, plaintiffs asserted claims of common law fraud and Racketeer Influenced and Corrupt Organizations Act (“RICO”) violations.

On October 22, 1997, after a two and one-half week trial, the jury returned a verdict in favor of United on the company’s trademark infringement, fraudulent trademark registration, and unfair competition claims against Midland. The jury awarded $761,866 in damages on those claims. The jury also determined that Donald Fox had engaged in fraudulent conduct against United and In-venta and awarded the two companies $1,314,063 in compensatory damages on the fraud claim. 1 (The court later reduced the compensatory fraud damages to $67,694.03 in response to defendants’ motion for judgment as a matter of law.) Upon the jury’s recommendation, the court, acting pursuant to Kansas law, then assessed $653,217 in puni-five damages against Fox. Plaintiffs, having exhausted the requisite consultations, see D. Kan. Rule 54.2, now move to recover the attorney fees they incurred during the course of this litigation.

II. Right to Attorney Fees

Plaintiffs predicate their attorney fee request on section 35 of the Lanham Act, 15 U.S.C. § 1117(a). This statute provides, in relevant part, that when a trademark infringement violation under 15 U.S.C. § 1125(a) has been established in a civil action. “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” It is undisputed that United’s favorable verdict on its trademark infringement claim renders it a prevailing party under § 1117(a). Defendants insist, however, that this lawsuit does not represent an “exceptional case” implicating an award of attorney fees.

An “exceptional case” under § 1117(a) is one in which the defendant's “trademark infringement can be characterized as malicious, fraudulent, deliberate, or willful.” VIP Foods, Inc. v.. Vulcan Pet, Inc., 675 F.2d 1106, 1107 (10th Cir.1982) (citing S.Rep. No. 93-400 (1973), reprinted in 1974 U.S.C.C.AN. 7132, 7133). The Tenth Circuit has determined that at the heart of every § 1117(a) attorney fee award is an “implicit recognition that some degree of bad faith [has] fuel[ed] the infringement at issue.” TakeCare Corp. v. Takecare of Okla., Inc., 889 F.2d 955, 957 (10th Cir.1989).

Plaintiffs presented ample proof of Midland’s bad faith in this action. The evidence established conclusively that Midland deliberately relabeled its “L-Fume”—an aluminum phosphide product of inferior quality—as “Quick-Phos” to deceive its customers and take unfair advantage of the prominent Quick-Phos name. As the court has observed on several occasions, Midland’s explanations for its conduct lacked credibility and the testimony of its representatives was often less than truthful. The actions of Midland’s president, Donald Fox, were particularly egregious. Despite clear knowledge of Unit *1258 ed’s ownership of the Quick-Phos mark and repeated warnings to cease his infringing activities, Fox instructed his subordinates to sell low-grade aluminum phosphide under a Quick-Phos label. Fox even went so far as to file an application on behalf of Midland with the United States Patent and Trademark Office to register the Quick-Phos mark as its own, in the process neglecting to disclose United’s prior use of the mark. In sum, Midland’s trademark infringement is easily characterized as malicious, fraudulent, deliberate, and willful. 2

Citing The Post Office v. Portec, Inc., 913 F.2d 802, 812 (10th Cir.1990), vacated on other grounds, 499 U.S. 915, 111 S.Ct. 1299, 113 L.Ed.2d 235 (1991), defendants maintain that the absence of a specific finding of willfulness or bad faith by the jury precludes an attorney fee award. The court disagrees. Although the Portee jury indicated in response to a special interrogatory that the defendant’s trademark infringing activities were willful and intentional, nothing in that opinion requires such a finding by a jury before attorney fees can be awarded. See generally Gorenstein Enters., Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 435-36 (7th Cir.1989) (upholding district court’s attorney fee award in apparent absence of specific finding of willfulness by jury); Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1026-27 (9th Cir.1985) (same); Exxon Corp. v. Exxene Corp., 696 F.2d 544, 550-51 (7th Cir.1982) (same). By its express language, in fact, § 1117(a) appears to contemplate the court making the requisite assessment whether the case is sufficiently “exceptional” to justify an award of attorney fees. Legislative history bolsters this conclusion. Seeking to abrogate the Supreme Court’s holding in Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967), Congress amended the Lanham Act in 1975 to permit the award of attorney fees in exceptional cases. See Brunswick Corp. v.

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United Phosphorus, Ltd. v. Midland Fumigant, Inc., 21 F. Supp. 2d 1255, 1998 U.S. Dist. LEXIS 13713, 1998 WL 559605 (D. Kan. 1998).

21 F. Supp. 2d 1255 (United Phosphorus, Ltd. v. Midland Fumigant, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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