Opinion
01 Civ. 2629 (DLC)
December 23, 2002
Louis S. Ederer, John Maltby, Joseph P. Tucker, Gursky Ederer, LLP, New York, NY, for Plaintiffs.
Mark L. Sutton, John Park, Benjamin Jesudasson, Los Angeles, CA, for Defendant.
OPINION AND ORDER
Plaintiffs seek attorney's fees and prejudgment interest following trial in this trademark action. By Opinion and Order dated July 11, 2002 (the "July 11 Opinion"), GTFM, Inc. and GTFM, LLC v. Solid Clothing Inc., 215 F. Supp.2d 273 (S.D.N.Y. 2002), this Court held that defendant Solid Clothing Inc. ("Solid") engaged in intentional trademark infringement in violation of Section 32 of the Lanham Act (the "Act"), 15 U.S.C. § 1114, false designation of origin in violation of Section 43(a) of the Act, 15 U.S.C. § 1125(a), common law trademark infringement and unfair competition, and the violation of New York General Business Law Sections 360-1 and 349. The July 11 Opinion held that because Solid engaged in willful infringement and acted in bad faith, plaintiffs GTFM, Inc. and GTFM, LLC (collectively "GTFM") were entitled to reasonable attorney's fees and expenses pursuant to 15 U.S.C. § 1117(a). 215 F. Supp.2d at 305-06. The July 11 Opinion further held that GTFM was entitled to prejudgment interest. Id. at 307.
GTFM has submitted an application for its fees and expenses and for prejudgment interest, and Solid has opposed the application. GTFM did not include in its post-trial application those fees and expenses for which it had already moved in two pre-trial motions for sanctions. In its opposition to GTFM's post-trial application, Solid reiterates its objections to the fees and expenses requested in GTFM's earlier motions for sanctions.
For the reasons stated, GTFM is awarded fees, expenses, and prejudgment interest in accordance with the rulings in this Opinion.
I. GTFM's Application for Attorney's Fees
GTFM seeks a total of $500,765.16 in attorney's fees and expenses. On June 21, 2002, GTFM filed a motion in limine for preclusion and for sanctions pursuant to Rule 37, Fed.R.Civ.P., and the inherent power of the court, in which it sought reimbursement of $24,571 for fees and expenses it allegedly incurred as a result of Solid's misconduct during discovery. GTFM now seeks $82,934.79 on that motion. On June 25, GTFM filed an additional motion for sanctions pursuant to Rule 37, Fed.R.Civ.P., and the inherent power of the court, in which it sought reimbursement for what it estimated as $40,000 in fees and expenses incurred while conducting an onsite inspection of Solid's business premises. GTFM now seeks $77,404.92 on its second motion. In its post-trial application, GTFM seeks the remainder of its fees and expenses, amounting to $340,425.45, pursuant to Section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a).
Rule 37(b), Fed.R.Civ.P., provides, in relevant part:
the court shall require the party failing to obey the order or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees, caused by the failure unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.
Rule 37(b), Fed.R.Civ.P. (emphasis supplied). See Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 106-07 (2d Cir. 2002). "'[This] provision places the burden on the disobedient party to avoid expenses by showing that his failure is justified or that special circumstances make an award of expenses unjust.'" Selletti v. Carey, 173 F.3d 104, 110 (2d Cir. 1999) (Quoting Rule 37(b), Fed.R.Civ.P., advisory committee note (1970 amendment)). Furthermore, "[e]ven in the absence of a discovery order, a court may impose sanctions on a party for misconduct in discovery under its inherent power to manage its own affairs." Residential Funding Corp., 306 F.3d at 106-07.
As stated in the July 11 Opinion, pursuant to 15 U.S.C. § 1117(a), a court may award "reasonable attorney's fees" to the prevailing party in "exceptional" circumstances. 215 F. Supp.2d at 305. The July 11 Opinion found that such circumstances exist in this case. Id. at 305-06. To determine how much of a plaintiff's requested fee award is reasonable under Rule 37, courts traditionally employ the "lodestar" method of calculation, by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate for attorneys and paralegals.See Creative Resources Group of New Jersey v. Creative Resources Group, No. CV 00-1565 (TCP), ___ F. Supp.2d ___, 2002 WL 31730596, at *9 (E.D.N.Y. Oct. 29, 2002); New Pacific Overseas Group v. Excal Int'l Dev. Corp., No. 99 CIV. 2436 (DLC), 99 CIV. 3581, 2000 WL 520661, *1 (S.D.N.Y. Apr. 28, 2000).
A. First Motion for Sanctions
In its opposition to GTFM's first motion for sanctions, Solid did not deny that it engaged in the misconduct identified by the plaintiff, but argued that it had turned a new leaf and "been very open, and as diligent as could reasonably be expected" since the Court's Discovery Order of April 5, 2002 (the "April 5 Order"). Solid also objects more specifically to approximately $45,000 of the $82,934.79 claimed by GTFM. It notes that it already paid GTFM $5,994.20 for certain of the expenses GTFM incurred during discovery. It argues that certain tasks would have been performed by plaintiffs' counsel even if there had been no misconduct by the defendant. Solid also objects to GTFM's use of two attorneys at the second deposition of Sang Park ("Park"), to its use of four attorneys at a cost of $12,317.50 to prepare the declaration in support of the first motion in limine for preclusion and for sanctions, and to $16,456.25 for conferences among plaintiffs' counsel.
As stated in the July 11 Opinion, 215 F. Supp.2d at 292, the Court issued a Discovery Order on April 5, 2002 directing Solid's counsel,inter alia, to submit a written statement at the time of production confirming the completeness of the search for and production of documents covered by the Order.
As described in the July 11 Opinion, GTFM, Inc., 215 F. Supp.2d at 291-93, Solid intentionally engaged in egregious misconduct during the course of discovery, including during the period following the Court's April 5 Order. Its misconduct prolonged the litigation and substantially increased the expense of the litigation. As already noted, it does not deny that it engaged in any of the conduct identified by GTFM in its First Motion for Sanctions. Solid has failed, furthermore, to justify its misconduct or present any special circumstances making the award of attorney's fees on GTFM's first motion for sanctions unjust. Since Solid continued to abuse the discovery process after the April 5 Order was issued, it is unnecessary to decide whether its purported reformation could excuse its prior misconduct.
GTFM shall subtract from the $82,934.79 it seeks, however, any amount already received from Solid for the time or expenses that are included in this application, the fees for the second attorney at the Park deposition, one-half of the fees requested for the preparation of the declaration, and one-half of any fees requested in its first motion for sanctions that are attributable to conferences among GTFM's counsel. Since there is an award of attorney's fees to GTFM for this litigation, it is unnecessary to examine in detail Solid's conclusory claim that some of the other fees requested in the first motion would have been incurred even in the absence of misconduct. Nonetheless, a survey of the fees requested in this first motion indicates that they are attributable to tasks required because of Solid's discovery abuses.
B. Second Motion for Sanctions
Solid objects to approximately $8,000 of the $77,404.92 of the fees and expenses sought in GTFM's second motion for sanctions. Solid contends that the $8,000 item is associated with GTFM's demand during the inspection of Solid's premises that GTFM be able to examine the records kept by Solid's accountant at his place of business. It objects as well to an unspecified sum associated with GTFM's inspection of Solid's computer records.
The entire amount sought in connection with the second motion for sanctions is properly awarded to GTFM. Solid's objection to approximately $8,000 of this amount is unfounded. The amount at issue is the cost of bringing GTFM's accountant to the inspection of Solid's premises. It was entirely reasonable to bring the accountant. Solid admits that it anticipated and agreed to the inspection of its accounting records at its premises. Its objection ignores that fact and argues instead that Solid never agreed to the inspection of its accountant's place of business. The sum sought by GTFM would have been incurred whether or not GTFM was able also to obtain access to Solid's accounting records held off-site. The sums related to the efforts to get access to Solid's computer records were also reasonable and should be paid.
C. Application for Attorney's Fees
In its opposition to GTFM's post-trial application for attorney's fees and expenses of $340,425.45, Solid objects to approximately $39,000 in fees incurred in connection with conferences among GTFM's attorneys. Solid argues that GTFM's counsel should have been able to proceed with fewer conferences. GTFM shall deduct $20,000 from the application.
II. GTFM's Application for Prejudgment Interest
"Although Section 1117(a) [of the Lanham Act] does not provide for prejudgment interest, such an award is within the discretion of the trial court and is normally reserved for 'exceptional' cases." American Honda Motor Co., Inc. v. Two Wheel Corp., 918 F.2d 1060, 1064 (2d Cir. 1990) (citation omitted). The July 11 Opinion, 215 F. Supp.2d at 307, found that prejudgment interest is appropriate in this case. GTFM seeks prejudgment interest calculated at an annual rate of nine percent, the New York statutory rate under New York Civil Practice Law and Rules § 5004, and compounded annually.
Solid now argues that GTFM should not receive prejudgment interest on both its actual damages and its lost profits. Section 1117(a) provides, however, that "the plaintiff shall be entitled . . . subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and the costs of the action." (Emphasis supplied.) This provision is interpreted in the conjunctive. See George Basch Co. Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992) ("both damage and profit awards may be assessed 'according to the circumstances of the case'").
Solid also argues that GTFM should not receive prejudgment interest on any "Unknown garments." See July 11 Opinion, 215 F. Supp.2d at 286. GTFM's prejudgment interest calculations, however, specifically exclude any interest for Unknown garments for the year 2001. For the reasons explained in the July 11 Opinion, 215 F. Supp.2d at 304, it is entirely appropriate to award damages on the sales of Unknown garments for the years 1999 and 2000.
Finally, Solid argues that if GTFM does receive prejudgment interest, it should be calculated at the average annual prime rate for each of the relevant years. Solid fails to cite any authority in support of this proposition. When calculating prejudgment interest in connection with violations of the Lanham Act, it is within the trial court's discretion to choose what rate to apply. Gillette Co. v. Wilkinson Sword, Inc., No. 89 CV 3586 (KMW), 1992 WL 30938, at *11 (S.D.N.Y. Feb. 03, 1992). GTFM shall calculate the prejudgment interest to which it is entitled at an annual rate of nine percent compounded annually.
Conclusion
For the reasons stated, GTFM is awarded fees and expenses and prejudgment interest in accordance with the rulings in the Opinion. GTFM shall submit a proposed Order by January 3, 2003.