Ledo Pizza System, Inc. et al v. Ledo Restaurant, Inc. et al
MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 4/12/12. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
LEDO PIZZA SYSTEM, INC., et al.
Civil Action No. DKC 06-3177
LEDO RESTAURANT, INC., et al.
trademark infringement, and unfair competition came on for a
bench trial in December 2008.
Thereafter, the court issued a
contract and awarded Plaintiffs nominal damages of one dollar
Plaintiffs appealed to the United States Court of
Appeals for the Fourth Circuit, which affirmed in part, vacated
in part, and remanded for an assessment of damages with respect
to an additional breach.
See Ledo Pizza System, Inc. v. Ledo
Restaurant, Inc., 407 Fed.Appx. 729 (4th Cir. 2011).
Pending before the court is the issue on remand from the
Fourth Circuit, as well as Plaintiffs’ motion for attorneys’
fees (ECF Nos. 133 and 143).
The relevant issues have been
briefed and the court now rules pursuant to Local Rule 105.6, no
Plaintiffs are Ledo Pizza System, Inc., Ledo Pizza
Carryouts, Ltd., Robert M. Beall, Margaret K. Beall, Robert G.
Beall, Troy L. Beall, James B. Beall, Garth E. Beall, Robert W.
Beall, Thelma W. Beall, Mildred Beall, and Thelma B. Beall.
hearing being deemed necessary.
For the reasons that follow,
Plaintiffs will be awarded an additional five dollars in nominal
The factual background of this case has been set forth in
detail in two prior opinions (ECF Nos. 94, 129) and will be
repeated here only insofar as necessary to frame the relevant
Restaurant, Inc.), located in Adelphi, Maryland, in or around
The founders’ sons – including Plaintiffs Robert M. Beall
and James B. Beall and Defendants Thomas E. (“Tommy”) Marcos,
brothers”) – became increasingly involved in the business over
Eventually, they began licensing, through Plaintiff
Plaintiff Ledo System, Inc. (“System”).
dispute over the businesses and a law suit was filed.
Mr. Marcos, Sr., was also named as a defendant in this
suit, but summary judgment was granted in his favor. (ECF Nos.
That ruling was upheld on appeal.
See Ledo Pizza
System, Inc., 407 Fed.Appx. at 731.
agreements, the Marcoses sold their interest in Carryouts and
System to the Bealls, who obtained sole ownership of the Ledo
In return, the Bealls sold their interest in the Ledo
Restaurant to the Marcoses.
The Marcoses also reserved the
right to establish future restaurants or carryouts in Bowie,
Maryland, and to “use the names ‘Ledo Restaurant,’ ‘Original
Ledo Restaurant’ or any other derivative name thereof except
‘Original Ledo Pizza,’ . . . in connection with the operation
[of those establishments].”
(ECF No. 129, at 2).
Soon thereafter, the Marcos brothers established Defendant
restaurant in Bowie called T.J. Elliott’s.
Jimmy Marcos began
running the day-to-day operations at T.J. Elliott’s, while Tommy
Marcos continued to oversee operations at the Ledo Restaurant in
In 2003, along with an associate named Deborah Hamann,
business known as Expressions Catering (“Expressions”).3
For ease of exposition, “T.J. Elliott’s” refers to both
Defendant Huntington City Restaurant, Inc., and the restaurant
it owned and operated. Similarly, “Expressions” refers to both
the catering business and the limited liability company that
Expressions, but had little other involvement in the business.
Rather, Ms. Hamann ran its daily operations and was generally
When Expressions was formed, the Marcos brothers spoke to Ms.
Hamann about limitations on the use of the Ledo mark and the
sale of Ledo pizza, but there were no other discussions on the
subject until after the instant suit was filed.
In 2006, an episode of the Oprah Winfrey Show named Ledo
Unfortunately, the parties did not see eye-to-eye on the import
of this segment and each came to believe that the other was
November 2006, counsel for the Bealls received a letter from the
Marcoses’ attorney, opining that the show was intended to honor
the pizza served at the Ledo Restaurant, not the pizza offered
settlement and license agreements, prompting an investigation of
Upon finding what they believed to be
Expressions – the Bealls commenced this action.
claims for (1) breach of contract (against the Ledo Restaurant,
(against Expressions); (4) trademark infringement (against the
Ledo Restaurant, T.J. Elliott’s, and the Marcoses); (5) unfair
defendants); (6) trademark dilution (against all defendants);
and (7) common law unfair competition and infringement (against
(ECF No. 46).
In count one, under the general
term “breach of contract,” Plaintiffs alleged numerous breaches,
including, as relevant here, “the advertising and sale of ‘Ledo
Expressions Catering in Calvert County, Maryland[.]”
46 ¶ 23(a)).
parties’ cross-motions for summary judgment.
(ECF Nos. 94, 95).
The remainder proceeded to trial.
Damages Associated with Expressions’ Use of the Ledo Mark
The evidence adduced at trial established that, following a
wedding reception for which eight Ledo pizzas were ordered from
Tommy Marcos at the Ledo Restaurant and delivered by Ms. Hamann
Those menus were posted on Expressions’
website and Expressions later handled two events at which Ledo
pizza was served.
For one of those events, a bar mitzvah, an
invoice was introduced into evidence indicating that assorted
Expressions, for a church in Bowie, Jimmy Marcos prepared what
was described as “Ledo” lasagna and tiramisu.
There was no
evidence that the Ledo mark was used in association with the
subsequently included “Ledo Lasagna” and “Ledo Tiramisu” on an
This menu was posted on the Expressions
business with the Ledo Restaurant.
It was uncontroverted that
the Marcos brothers had no knowledge of Expressions’ use of the
Ledo mark and that they did not expressly authorize such use.
Based on this evidence, the court found that Plaintiffs had
“established a breach for the use of Ledo marks and sale of Ledo
products by Expressions Catering”:
While [the wedding event] technically was a
breach of the Settlement Agreement, it was
totally inadvertent. The customer initiated
the transaction and Tommy Marcos unwittingly
adopted the mechanism, through Expressions,
to provide the customer what she wanted.
Hamann to compound the problem by adding
“Ledo Pizza” to some of Expressions’ sample
menus. This resulted in one further sale of
Ledo pizza by Expressions, at the bar
mitzvah, although these pizzas were not
purchased from the Ledo Restaurant, but from
one of Plaintiffs’ franchisees or licensees.
The [wedding] incident, in which eight
pizzas were provided by Expressions Catering
to the ultimate customer, was a breach of
contract by Tommy Marcos and the Ledo
Plaintiffs contend that the
Marcos brothers are also responsible for the
other sales of Ledo pizzas by Expressions
Catering under a principal/agent theory, but
this argument is unpersuasive.
Marcos brothers together own a majority of
Expressions Catering, they are not and never
operations of that business.
made Expressions his agent only for the
wedding event and not generally.
actions of Ms. Hamann in serving Ledo pizza
was not a breach of contract by the Marcos
brothers or Ledo Restaurant, Inc.
tiramisu and lasagna on the Expressions
different analysis, but ultimately reaches
the same result insofar as Plaintiffs’
agency argument is concerned.
(ECF No. 129, at 11-12 (internal footnote omitted)).
On appeal, the Fourth Circuit disagreed with this court’s
Expressions’ use of the mark:
Article 5.2 of the settlement agreement
outlines the restrictions applicable to the
Marcoses’ business activities.
none of the Marcoses, Ledo Restaurant
nor any of their successors or assigns
shall open or participate directly or
restaurant facility at any location
whatsoever utilizing in any was the
expansion thereof or the Ledo Pizza
recipe. . . .
There is no dispute that Expressions
was not permitted to use Ledo intellectual
Together, the Marcoses own sixty
ownership interest, they have, at least
indirectly, participated in a business using
the Ledo mark without authorization. . . .
Accordingly, we find that Expressions’ use
of the Ledo mark constituted a violation of
the agreements by the Marcoses.
we vacate this portion of the district
court’s decision and remand it to allow the
district court to consider damages on this
Ledo Pizza System, Inc., 407 Fed.Appx. at 731-32.
Following issuance of the appellate mandate, the parties
positions as to how to proceed on remand.
They agreed that no
competing views as to the scope of the remand.
the Court should enter additional judgments
against Tommy Marcos, Jr., [Jimmy] Marcos
and Ledo Restaurant for breach of contract
for each occasion when Expressions Catering
used any of the Ledo Intellectual Property
in any manner, including advertising, sales,
promotion, listings on the website, and
listings on the menu. . . . [T]he judgment
should be in the amount to be determined by
the Court based upon the evidence submitted
at trial, particularly Plaintiff’s Exhibits
5 and 6 [i.e., the wedding and bar mitzvah
invoices] and the testimony of Deborah
Alternatively, a nominal damages
award must be made for each of these
(ECF No. 148, at 1).
Defendants argued, on the other hand:
damages of $1) and all that remains in order
to comply with the direction of the Court of
Appeals is to enter that judgment against
certain other parties if this Court believes
that any non-zero award is appropriate.
course, the defendants maintain that the
appropriate damages award is zero.
(Id. at 2 (emphasis in original)).
The court reads the Fourth Circuit’s opinion as requiring
an assessment of damages for breach of the settlement agreement
by the Marcos brothers for each use by Expressions Catering of
the Ledo mark.
The evidence adduced at trial established that
such breaches occurred when Expressions used the mark: (1) on
the wedding invoice, (2) on the bar mitzvah invoice, (3) by
offering “Ledo” pizza on a menu posted to its website, (4) by
later offering “Ledo” lasagna and tiramisu on a menu posted to
its website, and (5) on the press release posted to its website.
incorporates its analysis from the prior memorandum:
While a party may bring an action for
damages, it still must prove them with
If it does not, it
“[W]hile other jurisdictions require proof
of actual damages to sustain a breach of
contract action, Maryland courts have held
that ‘[i]t is well settled that every injury
to the rights of another imports damage, and
if no other damages is established, the
party injured is at least entitled to a
verdict for nominal damages.’”
PFB, LLC v.
Trabich, 304 Fed.Appx. 227, 228 (4th Cir.
2008) (unpublished) (quoting
Maryland, Dep’t of Natural Res., 51 Md.App.
380, 443 A.2d 638, 640 (1982)). Thus, even
where a party fails to provide evidence
sufficient to support a damages claim, “its
cause of action for breach of contract
cannot fail as a matter of law because [it]
is entitled to, at the very least, nominal
damages, if the fact-finder determines there
was a breach.”
PFB, LLC, 304 Fed.Appx. at
228 (citing Planmatics, Inc. v. Showers, 137
F.Supp.2d 616, 624 (D.Md. 2001)).
(ECF No. 129, at 13-14).
As was the case with the two breaches the court originally
found – i.e., the posting of a disparaging article to the Ledo
Expressions of Ledo pizza at the wedding – Plaintiffs have not
shown that the five breaches associated with Expressions’ use of
their mark have resulted in measurable damages.
award of nominal damages is appropriate and judgment will be
entered in Plaintiffs’ favor, and against Defendants Tommy and
Jimmy Marcos, for one dollar as to each of these five breaches.
III. Plaintiffs’ Motion for Attorneys’ Fees
breach of contract claims upon which Plaintiffs were awarded
originates from the underlying license agreement.4
The indemnification provision in the license agreement
reads as follows:
a conflicting applicable federal rule of procedure, state law
governs not only the actual award of attorneys’ fees but also
the method of determining those fees.”
Rohn Prods. Int’l, LC v.
Sofitel Capital Corp. USA, Inc., Civ. No. WDQ-06-504, 2010 WL
3943747, at *4 n. 13 (D.Md. Oct. 7, 2010); see also McAdam v.
Dean Witter Reynolds, Inc., 896 F.2d 750, 775 n. 47 (3rd Cir.
1990) (“State rules concerning the award or denial of attorneys’
fees are to be applied in cases where federal jurisdiction is
based on diversity or if the court is exercising [supplemental]
Ledo Restaurant and the Marcoses . . .
hereby assume liability for the payment of
damages, lost profits, penalties, claims,
actions, suits, judgments, settlements, outof-pocket costs, expenses and disbursements
investigation, and reasonable attorney’s and
accountant’s fees) of whatever kind and
nature arising in any manner or under any
incurred by or asserted against either
Carryouts or System as a consequence of or
in connection with (a) any breach by Ledo
representation or warranty contained in this
Trademark Agreement, . . . or (b) any
failure by Ledo Restaurant or the Marcoses
contained in this Trademark Agreement or in
any other agreements or instruments provided
(ECF No. 46-3 ¶ 6(a)).
As Judge Hollander recently explained,
[T]he Maryland Court of Appeals has held
inappropriate mechanism for calculating fee
provisions in “disputes between private
Monmouth Meadows [Homeowners Ass’n, Inc. v.
Hamilton, 416 Md. 325, 336 (2010)]. This is
provision is designed by the parties, not by
the legislature. . . . Thus, it usually
serves no larger public purpose than the
interests of the parties.”
Hotel Corp. v. Mervis Diamond Corp., 200
Md.App. 489, 505, 28 A.3d 75, 84 (2011).
Rather than using the lodestar approach, a
court “should use the factors set forth in
foundation for analysis of what constitutes
a reasonable fee when the court awards fees
based on a contract entered by the parties
authorizing an award of fees.”
Meadows, 416 Md. at 336-37, 7 A.3d at 8.
Roger E. Herst Revocable Trust v. Blinds to Go (U.S.) Inc.,
Civil Action No. ELH-10-3226, 2011 WL 6444980, at *2 (D.Md. Dec.
20, 2011) (internal footnotes omitted).
court looks to eight factors:
novelty and difficulty of the questions
involved, and the skill requisite to perform
the legal service properly;
(2) the likelihood, if apparent to the
particular employment will preclude other
employment of the lawyer;
(3) the fee customarily charged
locality for similar legal services;
(4) the amount
(5) the time limitations imposed
client or by the circumstances;
professional relationship with the client;
(7) the experience, reputation, and ability
of the lawyer or lawyers performing the
whether the fee is fixed or contingent.
separately, and need not ‘make explicit findings with respect to
Rule 1.5 at all, or even mention Rule 1.5 as long as it utilizes
Pennington Partners, LLC v. J-Way Leasing,
LLC, Civil Action No. RDB-11-0972, 2012 WL 527661, at *2 (D.Md.
Feb. 17, 2012) (quoting Nautical Girl LLC v. Polaris Investments
Ltd., No. ELH-10-3564, 2011 WL 6411082, at *1 (D.Md. Dec. 19,
It should, however, “consider the amount of the fee
award in relation to the principal amount in litigation, and
this may result in a downward adjustment.”
“Cases decided under the lodestar approach can ‘provide
Congressional Hotel, 200 Md.App. at 505, 28 A.3d at 85, because
‘there is likely to be some overlap between the Rule 1.5 factors
and the mitigating factors typically considered in a lodestar
analysis.’ Monmouth Meadows, 416 Md. at 337, 7 A.3d at 8.”
Roger E. Herst Revocable Trust, 2011 WL 6444980, at *2 n. 5.
discretion, any other factor reasonably related to a fair award
of attorneys’ fees.”
Id. at 340, n. 13.
“The burden is on the
party seeking recovery to provide the evidence necessary for the
fact finder to evaluate the reasonableness of the fees.”
E. Herst Revocable Trust, 2011 WL 6444980, at *2 (internal marks
and citation omitted).
Plaintiffs seek a fee award of $251,493.50 “as a result of
covenants and agreements contained in the Trademark Agreement.”
(ECF No. 143, at 2).6
In support of their motion, they attach,
inter alia, voluminous time records, purportedly broken down by
hour and task,7 and the declaration of attorney Brent M. Ahalt.
2006, to February 23, 2011, five attorneys and three assistants
billed a total 1,132.40 hours in this case.
The vast majority
of time, 952.1 hours, was billed by Mr. Ahalt, who had been
commenced and billed at rates ranging from $200 to $250 per hour
While they also seek to recover costs associated with the
litigation, that issue was resolved on July 25, 2011, when the
clerk entered an order taxing costs in the amount of $6,953.91.
(ECF No. 149).
Although the chart tracks to some extent the suggested
litigation phase organization, the entries do not permit
calculation, for example, of the precise number of hours devoted
to the TRO and preliminary injunction.
over the course of the litigation.
Mr. Ahalt was one of two
attorneys who represented Plaintiffs at trial and their sole
representative on appeal.
His co-counsel at trial was John P.
Lynch, a veteran attorney with over twenty years of experience.
Mr. Lynch billed a total of 76.4 hours at rates ranging from
$270 to $325 per hour.
The remaining 103.9 hours was billed by
three associates, one law clerk, and two legal assistants at
rates ranging from $65 to $185 per hour.
In opposing Plaintiffs’ motion, Defendants argue, first and
Plaintiffs “warrants only the most minimal of fees, if any at
(ECF No. 144, at 8).
Indeed, Defendants characterize the
entire law suit, and particularly the appeal, as “unnecessary.”
(Id. at 4).
They further contend that Plaintiffs should not be
Plaintiffs lost and positions the Court rejected” (id. at 15);
attendance of both Mr. Ahalt and Mr. Lynch at trial and at pretrial
Plaintiffs appear to concede that a modest reduction based on
the degree of success they obtained may be appropriate.
take issue, however, with Defendants’ assessment of the extent
litigation and appeal was necessary.
In the court’s view, the first, third, and fourth factors
set forth under Rule 1.5 are particularly important in making a
determination of the appropriate fee award in this case.
involved unnecessary litigation within the case.
Plaintiffs’ motion for temporary restraining order, their motion
for entry of default, their intransigence on certain discovery
issues, which necessitated a motion to compel, and their filing
of a motion for reconsideration related to that ruling cannot be
fairly characterized as “required” time and labor.
records, however, do not permit precise calculation of these
In addition, some hours spent by Mr. Ahalt in contact
with Garth Beall should not be compensable.
Mr. Beall is a
plaintiff in the case; a shareholder, director, and officer of
The court previously granted Defendants’ motion to
compel him to respond to deposition questions that he refused to
answer on the ground of attorney-client privilege.
(ECF No. 53,
directly billed by Mr. Beall, but the records are still riddled
with entries by Mr. Ahalt related to contact with him and his
role in the litigation extended well beyond that of a typical
The court does not agree, however, that the attendance
of both Mr. Ahalt and Mr. Lynch at trial and at conferences was
While Mr. Ahalt was clearly the primary attorney
trial; thus, it would make little sense to disallow the time he
conclude on the instant record that the litigation or appeal was
wholly “unnecessary,” as Defendants suggest.
While it may be
true that the expense and scope of the litigation exceeded that
which might have been necessary, it is equally true that certain
clarified as a result.
Regarding the third factor under MRPC 1.5(a)(3), “the fee
customarily charged in the locality for similar legal services,”
Guidelines for Determining Attorneys’ Fees in Certain Cases,”
found in Appendix B to the court’s local rules, to determine the
reasonableness of hourly rates.
Mr. Ahalt’s declaration sets
forth the experience of the attorneys and assistants who worked
on the case, as well as their hourly rates (ECF No. 143-2), and
these rates fall within, if not below, presumptively reasonable
ranges in this district for legal professionals with comparable
See Local Rules, App’x B n. 3 (D.Md. 2011).
court concludes that the hourly rates charged by Plaintiffs’
counsel were reasonable, and Defendants do not argue otherwise.
The fourth factor, “the amount involved and the results
In their reply papers, Plaintiffs’ assert that
“[t]he only possible analysis to reduce the award of fees in
this matter is the number of counts on which the Plaintiffs
(ECF No. 146, at 7).
As to this much, the
It does not agree, however, with Plaintiffs’
claim that they “were successful on 4 of 7 . . . [or] 5 of 7
Neither is the court persuaded by the table
set forth by Defendants in their opposition papers, purporting
to show the limitations of Plaintiffs’ success.
(ECF No. 144,
complaint, the original judgment, and its decision on remand to
determine the degree of Plaintiffs’ success.
specific breaches of the agreements by the Ledo Restaurant, T.J.
Elliott’s, Thomas Marcos, Sr., Tommy Marcos, and Jimmy Marcos.
(ECF No. 46 ¶ 23).
Considering the court’s initial ruling and
its findings on remand, Plaintiffs prevailed on roughly half of
these claims against three of the defendants – i.e., the Ledo
Restaurant and/or the Marcos brothers – and failed to prove that
any measurable damages resulted.
The court declined to award
declaratory relief, requested in the second count, beyond the
extent to which the parties’ rights were clarified by virtue of
its decision on the breach of contract claims.
As to all the
remaining trademark infringement, trademark dilution, and unfair
In their respective motion papers, both parties point to
Nelson v. Cowles Ford, Inc., 77 Fed.Appx. 637 (4th Cir. 2003), as
authority for adjusting the fee award based on a percentage of
claims upon which the moving party succeeded.
In that case, the
plaintiff prevailed on one breach of contract claim, was awarded
attorneys’ fees based on a contractual fee-shifting provision.
plaintiff’s] lack of success” where he prevailed on only one of
Id. at 644.
Here, Plaintiffs have prevailed on
less than one-seventh of the total number of counts in their
second amended complaint; moreover, they have been awarded only
nominal damages as a result of their failure to prove measurable
extent that they clarified the parties’ rights under the prior
agreements and remedied minor breaches.
particularly those discussed in detail herein, the court finds
that an award of $25,000 in attorneys’ fees is appropriate.
For the foregoing reasons, Plaintiffs will be awarded an
additional five dollars in nominal damages and attorneys’ fees
in the amount of twenty-five thousand dollars.
A separate order
DEBORAH K. CHASANOW
United States District Judge
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