Employers Council on Flexible v. Kenneth Feltman
UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
EMPLOYERS COUNCIL ON FLEXIBLE COMPENSATION, Plaintiff Appellee, v. KENNETH FELTMAN; ANTHONY W. FLEXIBLE COMPENSATION, LTD., HAWKS; EMPLOYERS COUNCIL ON
Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. James C. Cacheris, Senior District Judge. (1:08-cv-00371-JCC-TRJ)
May 12, 2010
June 21, 2010
Before WILKINSON and KING, Circuit Judges, and HAMILTON, Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
ARGUED: Edward A. Pennington, HANIFY & KING, Washington, D.C., for Appellants. Bernard Joseph DiMuro, DIMUROGINSBERG, PC, Alexandria, Virginia, for Appellee. ON BRIEF: Anthony W. Hawks, HAWKS LAW OFFICE, Bethany Beach, Delaware, for Appellants.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM: In 2008, the Employers Council on Flexible Compensation
("ECFC") instituted this civil action in the Eastern District of Virginia against Kenneth Feltman, Anthony W. Hawks, and the
Employers Council on Flexible Compensation, Ltd. (collectively, the "defendants"), alleging trademark infringement and
Shortly thereafter, the parties entered into a
Permanent Injunction Order (the "Consent Order"), agreeing that certain of ECFC's marks were protected under the Lanham Act and the Anticybersquatting the Consent Consumer a Protection of Act (the "ACPA"). on the
trademark infringement and cybersquatting claims, the district court awarded ECFC attorney fees under the Lanham Act and
statutory damages pursuant to the ACPA.
See Flexible Benefits
Council v. Feltman, No. 1:08-cv-371 (E.D. Va. May 14, 2009) (the "Damages Opinion"). 1 The defendants have appealed, primarily
contending they did not admit liability in the Consent Order and, in any event, that attorney fees and statutory damages were not warranted. As explained below, we affirm.
The Damages Opinion is found at J.A. 132858. (Citations herein to "J.A. ___" refer to the Joint Appendix filed by the parties in this appeal.)
I. ECFC -- a nonprofit lobbying organization dedicated to the maintenance and expansion of private employee benefit programs -- was incorporated in 1981 in the District of Columbia under the name "Employers Council on Flexible Compensation." and 2008, ECFC continuously and exclusively Between 1981 "Employers
Council on Flexible Compensation" as its legal and trade name. The organization also used the acronym "ecfc," as well as an "ecfc" logo, to further designate its products and services. For example, in 1999, ECFC registered the domain name
"ecfc.org," at which it maintained a website promoting flexible benefit compensation programs. In 1996, ECFC encountered severe financial problems, which threatened the organization with bankruptcy. Defendant Kenneth
Feltman, who was then ECFC's executive director, was asked to create a separate management company that could assume ECFC's day-to-day indebtedness. operations and minimize Feltman the organization's Radnor, Inc.
("Radnor"), a political consulting firm specializing in, inter alia, management services. Radnor entered under into which and In 1997, 2003, and 2005, ECFC and management agreed to service hire agreements staff for
separate Radnor to
("MSAs"), (including ECFC.
Thus, although Feltman was technically no longer an ECFC 3
employee after the 1997 MSA, he continued to play a significant role in its management. In 2007, ECFC's relationship with Radnor soured, prompting ECFC to terminate an of the 2005 MSA. In November 2007, in ECFC the had
pilfered millions of dollars owed to ECFC.
filed a counterclaim in the arbitration proceeding, asserting that ECFC had wrongfully terminated the 2005 MSA. In January 2008, defendant Anthony W. Hawks -- a lawyer representing Radnor and Feltman in the arbitration proceeding -- discovered that ECFC's corporate charter had been revoked in September 1998 because ECFC had failed to file certain reports with the D.C. Department of Consumer and Regulatory Affairs (the "DCRA"). Rather than notifying ECFC, Feltman and Hawks instead
attempted to determine the legal implications of the revocation. Based on limited legal research, Hawks concluded that, pursuant to D.C. law, ECFC was dissolved as a matter of law and had forfeited any rights it had in the marks "ecfc" and "Employers Council on Flexible Compensation." Accordingly, in February
2008, Feltman and Hawks formed a for-profit corporation in the District of Columbia under the name "Employers Council on
Flexible Compensation, Ltd." ("ECFC Ltd."), with each serving as part owner thereof. Feltman and Hawks reserved with the DCRA 4
Flexible Compensation," and twenty-one variations of that name. Moreover, Patent Council in March 2008, Hawks to applied register as to the United States
"Employers design mark
identical to ECFC's "ecfc" logo. obtained the domain name
Finally, Feltman and Hawks -- which was similar to
ECFC's domain name, "ecfc.org" -- and maintained a website that was nearly identical to that of ECFC. In March 2008, ECFC first learned of the revocation of its corporate charter and promptly filed for reinstatement. Because
Feltman and Hawks had reserved "Employers Council on Flexible Compensation" as the trade name of ECFC Ltd., ECFC could not be reinstated under its former name and instead chose "Flexible Benefits Council" (though it continued to operate its website at the domain ECFC name filed "ecfc.org"). this lawsuit Soon thereafter, the on April in 17, the
Eastern District of Virginia, alleging, inter alia, trademark infringement, in contravention of § 43 of the Lanham Act, 15 U.S.C. § 1125(a), and cybersquatting, in contravention of the ACPA, 15 U.S.C. § 1125(d). By its complaint, ECFC sought
injunctive relief (1) prohibiting the defendants from using the name "Employers Council as on Flexible as 5 the Compensation" "ecfc," and and any (2)
ordering name. of
ECFC also sought reasonable attorney fees under § 35(a) Act, which authorizes attorney a court to "in the exceptional prevailing
the Lanham [to]
15 U.S.C. § 1117(a). up to $100,000
Finally, pursuant to the ACPA, in statutory damages on its
See id. § 1117(d) (authorizing recovery
of "an award of statutory damages in the amount of not less than $1,000 and not more than $100,000 per domain name"). During various hearings conducted over the ensuing months, ECFC and the defendants indicated to the district court that they were intent on settling the lawsuit, but that they
disagreed on damages.
The defendants maintained that, because
they had reasonably believed that they could legally use the name "Employers Council on Flexible Compensation" and the "ecfc" logo, their conduct did not warrant awarding ECFC attorney fees under the Lanham Act or statutory damages under the ACPA.
Because the only issue in dispute was whether attorney fees and statutory Consent Therein, damages Order, the were warranted, by the the parties on to or agreed 22, to the
2008. the or
distinctiveness rights in"
acknowledged that ECFC's "marks are subject to the protections 6
of the Lanham Act."
The Consent Order permanently enjoined
the defendants from using in any manner ECFC's marks and any names affiliated with the organization, thereby allowing ECFC to re-register Council on itself Flexible with the DCRA under the name the "Employers defendants
agreed to transfer the domain name "ecfc.com" to ECFC. Thereafter, the district court -- by the Damages Opinion of May 14, 2009 -- granted ECFC's request for attorney fees and statutory damages. the Consent Order, Notably, the court predicated its ruling on recognizing "[a]t for the outset . . . that
. . . and cybersquatting." observed that, "[a]s
Damages Opinion 6. to by the
The court also the issues
remaining for the Court are [ECFC's] requests for two of the types of damages available under these statutes: fees . . . and statutory damages." Id. attorney
In other words, the
court deemed the Consent Order to be the defendants' concession of liability under the Lanham Act and the ACPA, obviating any need to assess the merits of ECFC's claims. Turning to ECFC's request for attorney fees under the
Lanham Act, the district court found that the defendants had willfully and deliberately copied ECFC's logo and other items from ECFC's website in order to divert ECFC's profits to
The court also found that Feltman and Hawks had 7
intentionally reserved the name "Employers Council on Flexible Compensation" in an effort to prevent ECFC from reinstating its corporate charter under that name. The court thus determined
that the defendants had acted in bad faith and that the dispute amounted to an "exceptional case," warranting an award of
reasonable attorney fees to ECFC in an amount to be determined following an evidentiary hearing. to ECFC's request for statutory See Damages Opinion 28. 2 damages under the ACPA, As the
court found that the defendants had deliberately registered a domain name ("ecfc.com") that was confusingly similar to ECFC's domain name ("ecfc.org"). Accordingly, the court awarded ECFC See id. at 30. defendants Federal Rule filed of a motion for
$20,000 in statutory damages. On May 29, 2009, the to
59(e), contending that the district court's award of attorney fees and statutory damages was based on the clearly erroneous factual finding that the defendants had, by the Consent Order, admitted addition, liability under the Lanham Act and for the ACPA. In
the defendants moved the court to amend the Consent Order to clarify that they had not conceded liability on ECFC's trademark The district court ultimately awarded ECFC $292,500 in attorney fees under the Lanham Act. The amount of the award is not an issue in this appeal.
and cybersquatting claims. 20, 2009, the court denied
By its Memorandum Opinion of August each of the defendants' motions,
finding that the Consent Order's unambiguous terms, coupled with the parties' representations to the court before and after the Consent Order was entered, demonstrated that the defendants had conceded liability. See Employers Council on Flexible Comp. v. In denying
Feltman, No. 1:08-cv-371 (E.D. Va. August 20, 2009). 3
both motions, the court emphasized that, "[w]hen both parties (repeatedly) represent to the Court that they have resolved most of the issues between them and only one issue remains, they are necessarily representing that they have resolved all of the
issues but that one." "no reason to
Id. at 8. the
Because the court could find parties' representations on
settlement matters," it again concluded that the defendants had conceded liability the in the Consent the Order. defendants' Id. at 9. for
reconsideration and their motion to amend the Consent Order. The defendants have filed a timely notice of appeal, and we possess jurisdiction pursuant to 15 U.S.C. § 1121(a) and 28
U.S.C. § 1291.
The district court's August 20, 2009 Memorandum Opinion is found at J.A. 140318.
II. We review for abuse of discretion a district court's award of attorney fees under the Lanham Act. See Retail Servs. Inc. Any
v. Freebies Publ'g, 364 F.3d 535, 550 (4th Cir. 2004).
factual findings underpinning such an award, however, including the court's determination of whether the case is "exceptional," are reviewed for clear error only. See Carolina Care Plan Inc.
v. McKenzie, 467 F.3d 383, 390 (4th Cir. 2006), abrogated on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008); see also Schlotzsky's, Ltd. v. Sterling Purchasing & Nat'l Distrib. Co., 520 F.3d 393, 402 (5th Cir. 2008) ("The findings of the district court regarding the exceptional nature of a case are reviewed for clear error."). Similarly, in
assessing a district court's award of statutory damages within the range prescribed by statute, we review factual findings for clear error and the decision to award damages for abuse of
See Lyons P'ship, L.P. v. Morris Costumes, Inc.,
243 F.3d 789, 799 (4th Cir. 2001).
III. On appeal, the defendants raise several challenges to the district court's award of attorney fees and statutory damages. The crux of the defendants' appeal, however, is their contention that the court rested its damages award on a clearly erroneous 10
factual finding with respect to the Consent Order -- namely, that the defendants had therein conceded liability under the Lanham Act and the ACPA. Accordingly, we must first assess the
defendants' contention that the court erred by not independently determining whether they were liable on ECFC's trademark
infringement and cybersquatting claims.
We then turn to the
defendants' assertion that the court erred in deeming the matter an "exceptional case," warranting an attorney fees award under the Lanham Act. Finally, we assess the defendants' contention
that the court abused its discretion in determining that their conduct warranted an award of statutory damages under the ACPA. A. The defendants' primary contention on appeal is that the district court abused its discretion because its award of
attorney fees and statutory damages was based on the erroneous finding that they had admitted liability in the Consent Order. Emphasizing the terms thereof, the defendants maintain that the Consent Order enjoined them only from using ECFC's marks in the future and contained no explicit admission of liability with respect to their past use of ECFC's marks. They contend that,
before the court could properly assess whether the defendants' conduct was willful -- and warranted awarding attorney fees and statutory damages -- the court first had to determine whether they were in fact liable under the Lanham Act and the ACPA. 11 The
determination, its award of attorney fees and statutory damages must be vacated. The defendants' contention on their concession of liability is belied by the record, however, which is replete with
representations to the district court that the Consent Order resolved all issues concerning the merits of the trademark and cybersquatting claims. For example, during a motions hearing on
October 15, 2008 -- before the parties had agreed to the Consent Order -- ECFC informed the court that the parties had resolved "98 percent" of the issues and that the only remaining issue was ECFC's request for attorney fees and statutory damages. 960. J.A.
Indeed, both parties confirmed to the court that there was
no longer any need for a jury trial, which had been scheduled for early December 2008, and that the damages issue could be resolved following a short evidentiary hearing. Shortly
thereafter, during an evidentiary hearing on the damages issue, the court asked the parties whether there were any outstanding issues other than ECFC's request for attorney fees and statutory damages, and all parties responded that there were none. In light of these unambiguous representations, the district court did not clearly err in finding that, by the Consent Order, the defendants had conceded liability under the Lanham Act and the ACPA. See In re Charlie Auto Sales, Inc., 336 F.3d 34, 37 12
consent order is reviewed for clear error . . . if the court relies on extrinsic evidence such as the parties' intent."
At no point after entry of the Consent
Order did the defendants indicate to the court that the issue of their liability on the trademark and cybersquatting claims was outstanding and needed to be resolved. asserted that Order. those issues had been To the contrary, they resolved by the Consent
See, e.g., J.A. 1367 (defendants' counsel explaining to
court that "the only thing left [after the Consent Order] was the issue of willfulness" and that "[t]he only reason that was an issue is because of [ECFC's request for] attorney fees"). Accordingly, the defendants cannot successfully claim that the court erred in finding that, by agreeing to the Consent Order, they had admitted liability. Thus, the court did not abuse its
discretion in declining to further assess the merits of ECFC's trademark infringement and cybersquatting claims. 4
Because this record supports the district court's finding that the defendants conceded liability in the Consent Order, we also reject their appellate contention that the court abused its discretion in refusing to amend the Consent Order. Similarly, the defendants' assertion -- presented for the first time on appeal -- that they could not be held liable under the ACPA because they were not the "registrants" of the "ecfc.com" domain name, see 15 U.S.C. § 1125(d)(1)(D), is without merit.
B. The defendants next contend that, in awarding attorney fees pursuant to § 35(a) of the Lanham Act, the district court erred in finding this to be an "exceptional case." Section 35(a)
authorizes a district court, in "exceptional cases" involving trademark infringement or cybersquatting, to "award reasonable attorney fees to the prevailing party." Although the statute does not define 15 U.S.C. § 1117(a). the term "exceptional
case," we have recongized that an "exceptional case" is one in which willful "the or defendant's deliberate in conduct was malicious, People for fraudulent, the Ethical
Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th Cir. 2001) (internal quotation marks omitted). a prevailing plaintiff to succeed in a Put differently, "for request for attorney
fees, she must show that the defendant acted in bad faith." Scotch Whisky Ass'n v. Majestic Distilling Co., Inc., 958 F.2d 594, 599 (4th Cir. 1992). If the court deems the case
exceptional, it must then exercise its discretion to determine whether attorney fees should be awarded. See Enzo Biochem, Inc.
v. Calgene, Inc., 188 F.3d 1362, 1370 (Fed. Cir. 1999). The defendants maintain that the district court erred in deeming this case exceptional. that, when Feltman and Hawks More specifically, they contend reserved "Employers Council on
Flexible Compensation" as their new business's trade name, they 14
in good faith believed that ECFC had abandoned any rights it had in that name. Because Hawks and Feltman reasonably believed
that they could legally use ECFC's marks, the theory goes, the court could not have made the requisite finding of bad faith. The record, however, provides ample support for the
district court's determination that Feltman and Hawks willfully and deliberately infringed on ECFC's marks and reserved the name "Employers Council on Flexible Compensation" in order to prevent ECFC from reinstating ill-will itself toward under ECFC that is name. Indeed, in the
exchanged between Hawks and Feltman, wherein they admit that their goal in copying ECFC's marks was to "cause consternation in the ranks." J.A. 764. Moreover, the record reveals that
Hawks and Feltman believed that ECFC had wrongly "stolen" the company and its profits when it terminated the 2005 MSA, and that the revocation of ECFC's corporate charter presented "an opportunity [for Feltman to] retrieve his business by competing directly support against for the ECFC." court's Id. at 227. There that is Hawks also had ample only
conducted minimal legal research before concluding that ECFC had lost any rights to the name "Employers Council on Flexible
Compensation" and the "ecfc" logo. he spent "no more than one to
Hawks himself testified that two hours" researching the
trademark issues, despite not having encountered such a legal issue in the past "ten to twenty" years. Id. at 107576.
In these circumstances, the district court did not clearly err in finding that the defendants acted in bad faith and that the matter was an "exceptional case" under § 35(a) of the Lanham Act. And, having so concluded, the court did not abuse its in determining that attorney fees were warranted,
given the nature of the defendants' conduct.
reject the defendants' contentions in this regard and affirm the award of attorney fees. C. Finally, the defendants contend that the district court
abused its discretion in concluding that their conduct warranted an award of statutory damages under the ACPA. That statute
authorizes the owner of a protected mark to bring an action against any person who "has a bad faith intent to profit from that mark" and "registers, traffics in, or uses a domain name that . . . is identical or confusingly similar to . . . that mark." 15 U.S.C. § 1125(d)(1)(A). Upon proving a violation of
the ACPA, the owner of the protected mark may "recover, instead of actual damages and profits, an award of statutory damages in the amount of not less than $1,000 and not more than $100,000 per domain name, as the court considers just." Id. § 1117(d).
awarding ECFC $20,000 in statutory damages under the foregoing statutory provisions. The court carefully weighed several
aggravating and mitigating factors before concluding that the defendants' conduct warranted that award. For example, the
court acknowledged that the defendants had used the "ecfc.com" domain name for only a short time and apparently earned no
profits therefrom. been only one
Indeed, the court observed that there had of actual the confusion court of between the two
Nevertheless, supported the
particular, the court emphasized that Feltman had exploited a long and close working relationship with ECFC; that the
defendants had acted surreptitiously in registering their domain name, without first notifying ECFC of its corporate revocation; and that Hawks had only briefly researched whether ECFC had
abandoned its legal rights in the marks "ecfc" and "Employers Council on Flexible Compensation." court did not abuse its In these circumstances, the in making the award of
statutory damages. IV. Pursuant to the foregoing, we reject the defendants'
contentions and affirm. AFFIRMED 17
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