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Citi Trends, Inc. v. Coach, Inc.

United States District Court, D. Maryland

May 17, 2018

CITI TRENDS, INC., et al, Plaintiffs,
v.
COACH INC., et al, Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett, Judge

         On February 6, 2018, this Court denied Plaintiffs Citi Trends, Inc. and Kelly Martin's (collectively, "Plaintiffs" or "Citi Trends") Motion to Amend the Complaint for a Declarator}' Judgment against Defendants Coach Inc. and Coach Services, Inc. (collectively, "Defendants" or "Coach"), granted Defendants' Motion to Dismiss Plaintiffs' Complaint, and found Plaintiffs' Motion to Stay and Motion to Compel moot. (ECF Nos. 29, 30.) Currently pending before this Court is Defendants' Motion for Attorney Fees.[1] (ECF No. 31.) The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons that follow, Defendants' Motion (ECF No. 31) is GRANTED in the amount of $154, 565 in attorney's fees.[2]

         BACKGROUND

         This case stems from Coach, Inc., and Coach Sendees, Inc.'s (collectively, "Coach" or "Defendants") allegations that Citi Trends, Inc. and its buyer, Kelly Martin (collectively, "Plaintiffs" or "Citi Trends"), attempted to sell counterfeit handbags that were seized by the United States Bureau of Customs and Border Protection ("CBP") in the Port of Long Beach, California.[3] In April of 2017, Coach contacted Citi Trends regarding its infringement on one or more of Coach's trademarks and attached a draft complaint asserting claims against Citi Trends and Martin. The draft complaint indicated that it would be filed in the United States District Court for the Central District of California. After Citi Trends received the letter and draft complaint, the parties engaged in a series of communications and document exchanges. When it appeared such discussions were fruitless, Coach made a financial demand and indicated that if it did not receive the monetary demand by June 30, 2017, it would file its suit against Plaintiffs in California.

         Three days before that deadline, on June 27, 2017, Plaintiffs filed a Complaint in this Court under the Declaratory Judgment Act, [4] seeking a declaratory judgment that the handbags were not counterfeit and did not infringe on Defendants' trademarks, and their actions had not subjected them to liability under the Lanham Act, 15 U.S.C. §§ 1114, 1124, 1125(a); Section 526(a) of the Tariff Act, 19 U.S.C. § 1526(a); Unfair Competition in violation of Cal. Bus & Prof. Code § 17200 et seq.\ or California common law unfair competition. The next day, Coach filed its complaint in the California court[5] and also filed a Motion to Dismiss Plaintiffs' Complaint in this Court, asserting that this Court did not have jurisdiction over Plaintiffs' claims on two grounds.

         In response to Coach's Motion to Dismiss, Plaintiffs filed a Motion to Amend the Complaint related to Coach's first ground for dismissal. In the Motions, the parties disagreed with respect to the handbags asserted to be at issue in the April 25, 2017 letter Coach sent Citi Trends, die draft complaint Coach eventually filed in the California Court, and Citi Trend's Complaint in this Court. The Plaintiffs Original Complaint sought "a declaration that the Subject Bags do not contain counterfeit marks and do not infringe upon Defendant's trademarks." (Compl,, ECF No. 1 at ¶ 37) (emphasis added). These "Subject Bags" were bags that Citi Trends had purchased, received, and sold, and for which it received approximately $44, 839 in profits. (Id. at¶¶ 16-17.)

         Coach's first ground for dismissal then drew a distinction between two types of "Subject Bags, " and argued that Coach's April 25, 2017 letter and its draft complaint only threatened litigation for goods seized by agents of CBP, while Plaintiffs' Complaint solely related to goods that passed inspection and were sold into U.S. commerce. Accordingly, because a "real and substantial dispute" must exist to bring a complaint under the Declaratory Judgment Act, [6] Coach argued that there was not a dispute as to the sold goods upon which Plaintiffs' Complaint sought relief. Therefore, the Plaintiffs sought to amend the complaint in order to clearly seek a declaratory judgment relating to both the sold and seized goods, which Coach opposed. (ECF No. 19 at 6.) Coach's second ground for dismissal argued that regardless of whether this Court granted the Motion to Amend, this Court should decline to exercise jurisdiction under the Declaratory Judgment Act because Plaintiffs had engaged in forum shopping.

         This Court granted the Motion to Dismiss on Coach's second ground, finding good reason to decline to exercise jurisdiction under the Declaratory Judgment Act. Specifically, based on the facts described above, this Court found that Plaintiffs had waited until Coach's suit was "so certain or imminent, " that filing suit in this Court was "an improper act of forum shopping." LWRC Intern., LLC v. Mindlab Media, LLC, 838 F.Supp.2d 330, 338 (D. Md. 2011) (quoting Learning Network, Inc. v. Discovery Commc'ns, Inc., 11 Fed. App'x. 297, 301 (4th Cir. 2001)). Upon this Court's dismissal of Plaintiffs' suit, Plaintiffs withdrew a motion to dismiss they had filed in the United States District Court for the Central District of California on the basis that they had been the "first-to-file."[7] Coach Inc., et al. v. Citi Trends, Inc., et al., No. 2:17-cv-04775-DMG-KS, at ECF Nos. 19, 33. Plaintiffs then filed an answer to Coach's complaint, which did not assert any counterclaims. Id. at ECF No. 35. Samuel R. Watkins, Counsel for Coach, now seeks compensation for the time that he spent defending this action.

         STANDARD OF REVIEW

         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); see also Retail Services, Inc. v. Freebies Publishing, 364 F.3d 535, 553 (4th Cir. 2004). Coach asserts that it is entitled to attorney's fees because it is a prevailing party in this litigation and Plaintiffs' forum shopping made this case exceptional. Citi Trends asserts both that Coach is not a prevailing party and Coach has not shown that exceptional circumstances warrant awarding attorney's fees. This Court addresses these arguments in turn.

         ANALYSIS

         I. Coach is a prevailing party

         Plaintiffs argue that Coach is not a "prevailing party" under the Lanham Act given that this Court dismissed Plaintiffs' suit for lack of jurisdiction rather than on the merits. In CRST Van Expedited, Inc. v. Equal Employment Opportunity Commission, __U.S.__, 136 S.Ct. 1642 (2016), the United States Supreme Court held that "a defendant need not obtain a favorable judgment on the merits in order to be a 'prevailing party'" under Tide VIFs attorneys fee provision. 136 S.Ct. at 1651. The Court explained that "[c]ommon sense undermines the notion that a defendant cannot 'prevail5 unless the relevant disposition is on the merits." Id. Rather, a defendant "fulfill[s] its primary objective whenever the plaintiffs challenge is rebuffed, irrespective of the precise reason for the court's decision. The defendant may prevail even if the court's final judgment rejects the plaintiffs claim for a nonmerits reason." Id. Although the Court's opinion pertained to Title VIFs fee-shifting provision, the Court noted that "Congress has included the term 'prevailing party' in various fee-shifting statutes, and it has been the Court's approach to interpret the term in a consistent manner." Id. at 1646.

         Recendy in Raniere v. Microsoft Corporation, __F.3d__, 2018 WL 1832864 (Fed. Cir. Apr. 18, 2018), the United States Court of Appeals for the Federal Circuit considered whether a defendant was a "prevailing party" under the Patent Act, 38 U.S.C. § 285, after successfully dismissing the plaintiffs claims with prejudice for lack of standing. The court rejected the plaintiffs argument that there needed to be an adjudication on the merits in order to be a prevailing party. Id. at *4. Rather, the court cited CRSTs holding that "a favorable judgment on the merits is not necessary for a defendant to be deemed a prevailing party for purposes of statutory fee-shifting, " id. (citing CRST, 136 S.Ct. 1642) (emphasis added), and "[o]ur sister circuits have interpreted CRST to mean that, if a defendant succeeds on a jurisdictional issue, it may be a prevailing party." Id. at *6 (citing Small Justice LLC v. Xcentric Ventures LLC, 873 F.3d 313 (1st Cir. 2017) (holding that the defendant was a prevailing party after obtaining dismissal for lack of standing under the Copyright Act); Amphastar Pbarms. Inc. p. Aventis Tharma SA, 856 F.3d 696 (9th Cir. 2017) (holding that the defendant was a prevailing party after obtaining dismissal for lack of subject matter jurisdiction under the False Claims Act)). The court concluded by instructing that:

The relevant inquiry post-CRST, then, is not limited to whether a defendant prevailed on the merits, but also considers whether the district court's decision-"a judicially sanctioned change in the legal relationship of the parties"-effects or rebuffs a plaintiffs attempt to effect a "material alteration in the legal relationship between the parties." CRST, 136 S.Ct. at 1646, 1651.

Id. at *7.[8]

         This Court follows the reasoning of the First, Ninth, and Federal Circuits and holds that the Court's "prevailing party" analysis in CRST applies equally to the fee-shifting provision of the Lanham Act. Raniere v. Microsoft Corp., 2018 WL 1832864, at *6 (Fed. Cir. Apr. 18, 2018) ("Raniere has not persuasively explained why we should make a distinction between § 285 and other statutory provisions that award attorney fees to "prevailing parties, " and we see no reason to make such a distinction in light of the Supreme Court's clear command to construe the term "prevailing party" consistently across fee-shifting regimes."); Amphastar Tharms, 856 F.3d at 710 ("[CRST] made clear that its reasoning applied to other fee-shifting statutes, stating that 'Congress has included the term 'prevailing party' in various fee-shifting statutes, and it has been the Court's approach to interpret the term in a consistent manner." ...


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