It’s the claim preclusion stupid: Lucky Brand Dungarees v. Marcel Fashions

In Lucky Brand Dungarees, Inc., et al. v. Marcel Fashions Group, Inc., 590 U. S. ___ (2020) the United States Supreme Court [hereinafter the Court] held that new defenses could be raised in related litigation between the same parties if later claims were different from claims of an earlier proceeding. More specifically, the Court concluded that there was no common nucleus of operative facts when infringement claims from a proceeding lawsuit were directed at different trademarks at different times, although with identical parties.

A detailed knowledge of the litigation history is crucial to understanding the Court’s decision. During the 1980s Marcel Fashions [hereinafter Marcel] federally registered the trademark “Get Lucky” for clothing. In the 1990s Lucky Brand commenced using the mark “Get Lucky “as well as other marks including the word “Lucky” for these same products. In 2003 Marcel and Lucky Brand reached a trademark infringement settlement in which (i) Lucky Brand would refrain from using “Get Lucky” while (ii) Marcel would release Lucky Brand from infringement liability for Lucky Brand’s marks comprising the word “Lucky.”  In 2005 Lucky Brand commenced a second lawsuit in which Marcel counterclaimed that Lucky Brand continued to infringe Marcel’s mark “Get Lucky.” No other marks were at issue in these 2005 counterclaims for which judgement was entered in favor of Marcel.

In 2011, Marcel commenced a third lawsuit for trademark infringement by Lucky Brand. This time liability was based upon Lucky Brand’s marks comprising the word “Lucky,” but not for the phrase “Get Lucky.” Lucky Brand asserted as a defense that this claim was settled in 2003, and this settlement absolved Lucky Brand of infringement liability for marks comprising the word “Lucky.” Marcell contended that this defense should have been litigated in the second 2005 lawsuit, and because defendants failed to do so they could not raise it in the pending 2011 litigation.  Lucky Brand replied that the 2005 claims and 2011 claims differ from each other with respect to Lucky Brand’s conduct, timeline and theories of liability.  According to Lucky Brand, because Marcel raised a claim in 2005 only for “Get Lucky” then Lucky Brand could raise this settlement defense against a new claim for exclusively Lucky Brand’s remaining marks comprising the word ‘Lucky.’

The district court dismissed Marcel’s claims, but the U. S. Court of Appeals for the Second Circuit vacated and remanded based upon the doctrine of defense preclusion. The Court reversed and remanded the Second Circuit’s decision. The Court held that defense preclusion must satisfy the requirements for claim preclusion in this particular case.  Claim preclusion prevents parties from litigating issues which could have been raised and decided in a prior action.  Claim preclusion also requires that the claims in earlier and subsequent proceedings were identical to each other, or otherwise arose from the same nucleus of operative facts. In this instance, the 2005 claim was directed exclusively at trademark infringement of “Get Lucky.” In contrast, the 2011 lawsuit was directed exclusively to purported infringement by Lucky Brand’s marks comprising the work “Lucky,” but not including the term “Get Lucky.” Because these two lawsuits were directed to completely different marks and different conduct, there was no nucleus of operative facts between them. The Court also observed that claim preclusion generally does not bar claims which arise from events postdating the filing of an initial complaint, because these events often create new operative facts supporting a different claim.

© 2020 Adrienne B. Naumann, all rights reserved. Ms. Naumann does mot sponsor or endorse the advertisements at adriennebnaumann.wordpress.com

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