Cesari S.R.L. v. Peju Province Winery L.P. et al
Filing
472
OPINION AND ORDER: For the reasons stated above, the Court awards profits in the amount of $666,214. It is hereby ordered that the deadline for plaintiff to file a motion for attorneys' fees and costs, if any, is October 20, 2023. That ap plication shall include: (i) caselaw support for plaintiffs application demonstrating that this action is an exceptional case; (ii) a sworn declaration providing each attorney and legal support staff's background, experience, and billing rate at the time the work was expended; (iii) copies of contemporaneous time sheets that include the date, hours expended, and nature of work completed, specifically noting the filings or motions that were worked on in that entry; (iv) a chart aggregat ing the fees and costs sought by plaintiff to each stage of the litigation (e.g., particular motions, letters, deposition preparation, depositions taken, court appearances and related preparation, etc.); (v) a chart describing any costs sought by p laintiff; and (vi) a chart detailing the attorneys' fees and costs already paid by plaintiff and those outstanding as of the date of the submission. 36 If necessary, the deadline for defendant to file an opposition to plaintiff's motion is October 20, 2023. SO ORDERED. (Motions due by 10/20/2023. Responses due by 10/20/2023.) (Signed by Judge Naomi Reice Buchwald on 9/22/2023) (mml)
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 1 of 52
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------X
CESARI S.R.L.,
Plaintiff,
OPINION AND ORDER
- against -
17 Civ. 873 (NRB)
PEJU PROVINCE WINERY L.P., PEJU FAMILY
OPERATING PARTNERSHIP L.P., and PEJU
PROVINCE CORPORATION,
Defendants.
---------------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
In 2017, plaintiff Cesari S.r.l. (“plaintiff” or “Cesari”),
an Italian winery based in San Pietro that produces wine bearing
the
mark
“LIANO,”
brought
this
trademark
infringement
action
against defendants Peju Province Winery L.P. (“PPW”), Peju Family
Operating Partnership L.P. (“PFOP”), and Peju Province Corporation
(“Peju Corporation”) (collectively, “Peju”), a family-operated
winery in Northern California that has produced wines branded
“LIANA.”
After
the
Court
granted
plaintiff’s
unopposed
application to dismiss Peju Corporation from this action and
resolved the issue of liability in favor of plaintiff, the Court
held a bench trial on the sole remaining issue of disgorgement of
profits from PPW and PFOP (collectively, “defendants”).
This
opinion constitutes the Court’s findings of fact and conclusions
of law.
1
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 2 of 52
Having considered all of the evidence, the Court concludes
that plaintiff is entitled to profits in the amount of $666,214
plus interest.
In so holding, the Court makes the following
factual determinations, discussed at length below: (1) defendants
earned $1,070,879 in revenues from the sale of infringing wines;
(2) defendants incurred costs of $404,665 (including excise taxes)
related
to
these
sales;
and
(3)
an
equitable
adjustment
is
unnecessary.
PROCEDURAL HISTORY
A. Initial Pleadings
On February 6, 2017, plaintiff filed its initial complaint
and
asserted
five
causes
of
action:
(1) federal
trademark
infringement under 15 U.S.C. §§ 1114, 1117; (2) federal unfair
competition under 15 U.S.C. § 1125(a); (3) common law trademark
infringement; (4) common law unfair competition; and (5) cybersquatting under 15 U.S.C. § 1125(d).
See ECF No. 1 (“Compl.”).
For relief, plaintiff sought a declaratory judgment, a permanent
injunction, disgorgement of profits, damages, and attorneys’ fees
and costs.
The crux of plaintiff’s complaint is that Peju’s sales of its
“LIANA” branded wines infringed upon plaintiff’s “LIANO” mark,
which was federally registered with the United States Patent and
Trademark Office (“USPTO”) for wines in International Class 33 on
2
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 3 of 52
January 7, 2003.
See ECF Nos. 1-1; 15 (“Answer”) ¶ 3 1; 42 at 1.
Around the time that plaintiff obtained its mark, Peju began
promoting its wine dubbed “LIANA.”
See ECF No. 372 at 1.
Indeed,
in February 2003, PPW filed its own application with the USPTO to
register “LIANA,” which was opposed by plaintiff and ultimately
rejected by the Trademark Trial and Appeal Board (“TTAB”) of the
USPTO on July 20, 2004 on the grounds that Peju’s “LIANA” mark was
confusingly similar to plaintiff’s registered “LIANO” mark.
See
id. at 2; ECF No. 1-2 at 2.
Rather than appealing the TTAB decision, or even filing a new
application to register “LIANA” for narrower usages, PPW simply
continued using the “LIANA” mark until 2007, after which the mark
lay dormant until 2014.
See ECF Nos. 42 at 4; 372 at 2; Answer
¶ 36. Beginning in 2014, Peju sought to resurrect the LIANA brand.
See ECF No. 372 at 2. The following year, Peju “founded an entirely
new winery, Liana Estates” and began “promot[ing] [its] wines under
the LIANA ESTATES label.”
ECF Nos. 42 at 4; 372 at 2, 5; Answer
¶ 36. Allegedly unaware of its affiliate’s prior attempt, in March
2016, PFOP also “submitted a new application with the USPTO to
register LIANA, this time for all alcoholic beverages except for
beer.”
ECF No. 42 at 4-5.
In response, plaintiff sent Peju a
In its answer to plaintiff’s original complaint, Peju admitted that “Cesari
is the listed owner of a U.S. trademark registration for the LIANO mark for
wines, and that Cesari filed a declaration of incontestability under Section 15
in support of the registration.” Answer ¶ 3; see also id. ¶¶ 19, 20.
1
3
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 4 of 52
cease-and-desist letter, and attempted to negotiate a resolution.
See
Compl.
¶
42;
Answer
¶
42,
ECF
No.
372
at
After
11. 2
negotiations failed, on January 30, 2017, plaintiff, once again,
commenced opposition proceedings before the TTAB and, one week
later, brought this action.
See ECF No. 372 at 11.
B. Preclusive Effect of TTAB’s Prior Ruling on Likelihood of
Confusion as to PPW
After Peju answered plaintiff’s complaint, see Answer, the
Court granted plaintiff leave to move for partial summary judgment
on the issue of whether Peju is “precluded from relitigating the
TTAB’s
determination
that
the
LIANA
confusion with Cesari’s mark, LIANO.”
mark
is
likely
to
ECF No. 42 at 6.
cause
In its
December 11, 2017 decision on plaintiff’s motion, the Court granted
in part and denied in part plaintiff’s motion for partial summary
judgment.
See id. at 3-6.
First, the Court held that issue preclusion should apply,
given “the usages adjudicated by the TTAB are materially the same
as those before the [Court].”
See id. at 6 (quoting B&B Hardware,
Inc. v. Hargis Indus., Inc., 575 U.S. 138, 160 (2015)).
so,
the
Court
rejected
Peju’s
argument
that
In doing
“their
actual
marketplace usage of LIANA is materially different from that which
“Peju admits that Cesari’s trademark counsel sent a cease-and-desist letter
to the attorney of record for the LIANA application filed by Defendant Peju
Family Operating Partnership, L.P.” Answer ¶ 42.
2
4
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the TTAB adjudicated,” 3 id. at 8-9, as the TTAB had broadly
concluded
that
plaintiff’s
mark,
LIANA,
was
likely
to
cause
confusion with Cesari’s previously registered mark, “LIANO,” given
“[t]he sole distinction between the two marks is the last letter,”
and the parties’ goods (i.e., wines in International Class 33) are
“identical.”
Id. at 3; ECF Nos. 1-2 at 2, 4; 437 at 1.
Moreover,
the Court noted that “[t]he specific trade channels and classes of
consumers that purportedly characterize the LIANA mark’s usage are
among the reasonable trade channels and usual classes of consumers
the TTAB considered.”
However,
insufficiently
the
ECF No. 42 at 9.
Court
also
developed
to
concluded
permit
the
that
Court
the
record
was
to
extend
the
preclusive effect of the TTAB decision rejecting PPW’s application
to PFOP and Peju Corporation.
judgment
with
respect
prejudice
to
refiling
record.”
to
See id. at 12-15.
[that]
following
issue
further
[was]
Thus, “summary
denied
development
without
of
the
Id. at 14.
Following the Court’s ruling, Peju represented to this Court
that “the only issues remaining in this case are whether Peju
Province Corporation and/or Peju Family Operating Partnership,
L.P. controlled Peju Province Winery L.P. in the previous TTAB
3 In so holding, the Court rejected defendants’ argument that the TTAB failed
to consider the differences between defendants’ labels, such as one iteration
in which “LIANA ESTATES appears only on the back of the wine bottle.” See ECF
Nos. 29 at 8-10; 437 at 1-2.
5
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 6 of 52
litigation, whether Peju Province Winery L.P. controls one or both
of these entities in the instant litigation, and whether Plaintiff
is entitled to any remedies, and, if so, the nature of those
remedies.”
ECF No. 55 at 2.
C. Peju’s Use of the Infringing Mark Until July 2018
On March 12, 2018, the Court entered a scheduling order
governing discovery.
See ECF No. 50.
Shortly thereafter, on
May 10, 2018, plaintiff sought leave to file yet another motion
for
partial
summary
judgment,
which
included
a
request
for
injunctive relief because Peju “willfully continue[d] to infringe
[upon] Cesari’s registered mark, as if this Court’s ruling hadn’t
issued” and had “ignored Cesari’s requests that they cease and
desist from their willful infringement.”
However,
“[o]n
June
12,
2018,
this
ECF No. 53 at 1-2.
Court
held
a
lengthy
teleconference with counsel for all parties,” during which the
Court determined that “plaintiff’s request to file a motion for
injunctive relief . . . had essentially been mooted by defendants’
counsel’s representation that defendants would cease using the
disputed mark within two weeks.”
ECF No. 79 at 1.
In letters of June 28, 2018, see ECF No. 75, and July 9, 2018,
see ECF No. 78, plaintiff alerted the Court to the fact that Peju
had not followed through on their counsel’s representations, see
ECF No. 79 at 1.
As such, on July 10, 2018, the Court gave
plaintiff permission to move for a preliminary injunction.
6
See
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 7 of 52
id.
at
2.
As
a
result,
defendants’
counsel
made
another
representation to the Court on July 16, 2018 that Peju will
completely cease using “LIANA” by July 24, 2018.
See ECF No. 82
at 2 (“[W]e wish to inform Your Honor that LE Wines, formerly Liana
Estates, remains in the process of relabeling its wines bearing
the LIANA mark. This undertaking, which has been substantial, is
expected
to
be
complete
by
no
later
than
July
24,
2018.
Accordingly, we are informed that no sales of wine bearing the
LIANA mark will occur after this date.”); ECF No. 82-1 (attaching
photographs showing removal of “LIANA Estates” from the winery’s
signage).
Accordingly, plaintiff’s motion was no longer necessary
and was not made at that time.
See ECF No. 84 (order stating that
motion for injunction was no longer “necessary or appropriate”).
D. Amended Pleadings
The parties continued to engage in discovery, which became
highly contentious.
See ECF No. 84.
Indeed, during the course of
this litigation, the Court has resolved an overwhelming number of
discovery disputes, particularly for a case lacking substantial
complexity. 4
See e.g., ECF Nos. 71, 79, 84, 104, 150, 182, 188,
189, 210, 231, 240, 243, 254, 255, 289, 297, 308, 333, 375, 391,
427.
Indeed, the Court has noted that it had “invested such an
4 The Court has provided the parties with an extraordinary amount of assistance
in this regard.
For example, during a five-hour conference on plaintiff’s
motion for sanctions, the Court permitted plaintiff to question defendants’
deposition witness, Kandiss Schulz, in Court. See ECF No. 289.
7
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inordinate
amount
of
time
assisting
the
parties
to
resolve
discovery disputes and move this case” forward, ECF No. 297,
against a backdrop where the parties “resorted to filing documents
with errors that, quite frankly should not be made,” ECF No. 137
at 7.
On November 7, 2018, after plaintiff again sought to extend
the preclusive effect of the TTAB decision to PFOP and Peju
Corporation through a renewed motion for summary judgment, 5 the
Court clarified that the parties should focus their discovery
efforts on two areas: the first being “the preclusive effect of
the 2004 TTAB proceeding” on PFOP and Peju Corporation; and the
second being “the remedies available to plaintiff.”
at 8.
ECF No. 137
On the second area, the Court explained:
If plaintiff cannot extend the TTAB determination to
Peju Corporation and Peju Partnership, the Court will
need to determine the likelihood of confusion between
the LIANO and LIANA marks by analyzing Peju Corporation
and Peju Partnership’s “use in commerce” of the LIANA
mark and comparing that use to that of Cesari and its
LIANO mark. See 3 Anne Gilson LaLonde, Gilson on
Trademarks § 11.08[4][i][iv][C][I] (Matthew Bender ed.);
see also id. (“Federal courts are focused on what is
happening in the marketplace rather than in an
application or registration.”). In addition, to recover
profits, as plaintiff seeks, from any defendant, Cesari
must prove only the defendants’ sales, and defendants
must prove any costs or deductions from its gross
revenues. See 15 U.S.C. § 1117(b).
5 In its November 7, 2018 decision, the Court again declined to extend the
preclusive effect of the TTAB decision to these two entities because the factual
record continued to be insufficiently supported.
The Court also noted that
plaintiff’s renewed motion for summary judgment and discovery dispute letters
had a “sense of impatience.” ECF No. 137 at 7.
8
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Id. at 8-9. 6
At
a
January
17,
2019
conference,
plaintiff’s
counsel
informed the Court that discovery from Peju’s former accountant
had
revealed
various
transactions
among
PPW,
PFOP,
and
Peju
Corporation, including a transfer of PPW’s assets to PFOP, thereby
supporting plaintiff’s argument that the preclusive effect of the
TTAB decision should be extended to PFOP and Peju Corporation.
See ECF No. 150 at 50:12-14.
Plaintiff’s counsel also stated that
it decided to “not pursue a theory of lost profits,” see id. at
3:20-22; see also id. at 4:4-5 (“[W]e focused our entire discovery
on the disgorgement of profits.”), and notified the Court that it
Years later, Peju argued that plaintiff could not prove trademark infringement,
even with respect to PPW, unless plaintiff established that it has a valid mark
entitled to protection and that defendants used the same or similar mark in
commerce. See ECF Nos. 248; cf. ECF No. 431 (raising same argument). In its
December 10, 2020 opinion, this Court rejected defendants’ argument, explaining:
6
TTAB previously held in its summary judgment ruling that ‘[t]here
is no genuine issue of fact [that] . . . the registration [of the
LIANO mark] is subsisting and is owned by [Cesari],’ a conclusion
that necessarily involved a finding that the mark was used by Cesari
in commerce.
ECF No. 255 at 6-7; see also ECF No. 437.
The Court further noted that “regardless of the preclusive effect of the TTAB’s
judgment as to specific defendants, that Cesari owns a valid registered
trademark in LIANO is an established fact, which the Court observes has never
previously been challenged in this litigation.” ECF No. 255 at 7. Consistent
with the Court’s guidance on November 7, 2018, however, the Court permitted
defendants to explore the “use of commerce” issue in its 30(b)(6) deposition
“at a basic level,” while acknowledging “if plaintiff’s non-use of the trademark
were truly a defense in this nearly four-year-old case, it would have been
raised and pursued years ago.” Id. After the Court ruled that the preclusive
effect of the TTAB decision could be extended, this area of inquiry was no
longer relevant. Accord ECF No. 375 at 4:5-9 (transcript from September 25,
2022 conference in which the Court stated that the issue of liability has been
resolved, and neither party disagreed or objected).
9
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was
withdrawing
its
request
for
permanent
injunctive
relief
because Peju had represented that they had ceased using the LIANA
mark, see ECF No. 191 at 4.
Plaintiff accordingly requested
permission to move to amend its complaint.
See ECF No. 150 at
53:16-18.
Three years after the filing of the initial complaint and
after a full briefing, on February 24, 2020, the Court granted
plaintiff’s motion for leave to amend its complaint to incorporate
facts obtained during discovery to support a finding that PFOP and
Peju
Corporation
could
be
held
indirectly
liable
for
PPW’s
infringement through means other than collateral estoppel.
ECF No. 191 at 15.
See
On March 2, 2020, plaintiff filed its amended
complaint, which made these additions and omitted plaintiff’s
cyber-squatting claim 7 and requests for injunctive relief and
damages,
thereby
concentrating
on
obtaining
profits.
See ECF No. 197 (“Am. Compl.”).
disgorgement
of
As a result of these amendments, on April 30, 2020, the Court
instructed the parties to “focus[] on the discovery” and “these
sales and cost records.” See ECF No. 210 at 43:8-10.
Peju filed
Plaintiff consolidated its remaining claims into two causes of action:
(1) federal trademark infringement and unfair competition under 15 U.S.C. §§
1114, 1125(a), 1117; and (2) New York trademark infringement and unfair
competition. See Am. Compl.
7
10
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an answer to the amended complaint on May 14, 2020. 8
See ECF
No. 213.
E. Dismissal of Peju Corporation
On September 5, 2021, in a joint letter, the parties informed
the Court that they “have agreed that Cesari will drop Peju
Province Corporation as a party defendant” and thus requested that
the Court drop Peju Corporation as a party pursuant to Federal
Rule of Civil Procedure 21.
See ECF No. 298 at 4.
2021,
the
the
Court
granted
application,
On October 5,
dismissing
Peju
Corporation, the general partner of PPW and PFOP, from the action.
See ECF No. 299; cf. ECF Nos. 58 at 3; 372 at 1 n.1.
F. Extension of Preclusive Effect of TTAB Decision to PFOP and
Finding of Bad Faith
After additional years of combative litigation, the parties
filed another round of summary judgment motions.
at 3.
See ECF No. 372
Defendants sought dismissal of all of plaintiff’s claims as
untimely under the applicable statute of limitations and the
equitable doctrine of laches, while plaintiff, once again, sought
dismissal of defendants’ same affirmative defenses and renewed its
Before filing an answer, defendants sought leave to file a motion to dismiss
on the grounds that “plaintiff’s claims are barred by the statute of
limitations, and by laches and acquiescence.” See ECF No. 198 at 2. The Court
held a pre-motion conference on April 30, 2018 to address defendants’ request,
during which it instructed defendants to raise their arguments in a motion for
summary judgment, rather than a motion to dismiss, given that defendants
acknowledged that they would need to go outside the record to substantiate their
arguments. See ECF Nos. 210 at 3:6-14; 255 at 3-4.
8
11
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motion for partial summary judgment to extend the preclusive effect
of the TTAB decision to PFOP. 9
See id. at 3-4.
On August 3, 2022, the Court granted plaintiff’s motion to
extend the preclusive effect of the TTAB decision to PFOP, after
defendants conceded, five years into the litigation, that PPW and
PFOP “are effectively one and the same entity because, inter alia,
they share common ownership and control.”
Id. at 17.
The Court
also dismissed defendants’ affirmative defenses with prejudice.
See id. at 13-43.
On defendants’ statute of limitations argument,
the Court reasoned, in part, that the claims asserted in the
amended complaint arise from defendants’ conduct since 2014, which
is within New York’s six-year statutory period.
See id. at 24,
33-35. With respect to defendants’ laches defense, the Court held,
in part, that defendants could not even satisfy the threshold
requirement that the party invoking laches come to court with clean
hands.
See id. at 36.
The Court explained:
Peju did not use the LIANA mark in good faith. As
discussed above, between 2005 and 2007, Peju continued
to use the LIANA mark despite actual knowledge of
Cesari’s first-in-time registered trademark, Cesari’s
opposition to Peju’s use of the LIANA mark, and the
TTAB’s ruling that Peju’s mark was likely to cause
confusion with Cesari’s mark. Although the TTAB’s ruling
may not have legally enjoined Peju from using the LIANA
mark, Peju dirtied its hands when it flouted the legal
9 As the Court explained in its August 3, 2022 decision, the preclusive effect
of the TTAB decision to PFOB could not be made during plaintiff’s previous
summary judgment motions because “plaintiff had failed to establish, based on
the record before the Court, the requisite relationship” among the entities.
Id. at 4 n.4.
12
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conclusion of a judicial authority and disregarded its
duty as a second comer “to avoid all likelihood of
consumers confusing it with the product of the first
comer.” Nikon, Inc. v. Ikon Corp., 803 F. Supp. 910,
922 (S.D.N.Y. 1992); see Thursday LLC v. NVB, Inc., No.
20 Civ. 9142 (AKH), 2021 WL 2689061, at *5 (S.D.N.Y.
June 29, 2021) (concluding plaintiff sufficiently stated
claim for unfair competition under New York law, which
required showing of bad faith or intent, where plaintiff
alleged, inter alia, defendant “began using the marks
despite the USPTO’s refusal to register their mark due
to the likelihood of confusion with the [plaintiff’s]
Marks”).
With respect to Peju’s second attempt to register the
LIANA mark, Peju again acted in bad faith. Even assuming
the Peju daughters were unaware of the original dispute
with Cesari when they sought to resurrect the LIANA brand
in 2014, Peju was put on notice of Cesari’s registered
mark and opposition in August 2016, when Cesari filed a
request for an extension of time to oppose the 2016
Application. See Ariana Peju Decl., Ex. E. Cesari then
sent Peju a cease-and-desist letter in November 2016.
Id., Ex. F. In January 2017, Cesari apprised Peju of the
TTAB’s prior determination that the LIANA mark was
likely to cause confusion with Cesari’s mark. Id., Ex.
I. Peju nevertheless continued to use the LIANA mark. It
wasn’t until July 2018 — one and a half years after this
action was commenced — that Peju finally terminated its
use of the LIANA brand. See July 16, 2018 Letter, ECF
No. 82.
In their reply, defendants argue, without citing to any
authority from the Second Circuit, that the unclean
hands doctrine requires a showing of fraudulent intent
and that no such showing has been made here. Mem. of
Law of Peju Province Winery L.P. and Peju Family
Operating Partnership L.P. in Further Support of their
Mot. for Summary Judgment (“Def. Reply Br.”) at 7, ECF
No. 362. To the contrary, “[a]ny willful act concerning
the cause of action which rightfully can be said to
transgress
equitable
standards
of
conduct
is
sufficient.” Precision Instrument Mfg. Co., 324 U.S. at
815. Further, although “prior knowledge of a senior
user’s mark does not in itself imply bad faith . . .
actual or constructive knowledge may signal bad faith.”
Nikon, 803 F. Supp. at 924. In more ways than one, the
13
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foregoing demonstrates that Peju does not “possess a
right which is firmly planted in good faith.” Id. Peju
“took a calculated risk in utilizing [the] mark and the
aid of a court of equity should not be invoked on behalf
of one who lost such a gamble.” Fusco Group, Inc. v.
Loss Consultants Int’l, Inc., 462 F. Supp. 2d 321, 330
(N.D.N.Y. 2006) (internal quotation marks and citation
omitted).
Id. at 37-39.
Finally, the Court’s decision of August 3, 2022 “resolve[d]
the issue of liability.”
ECF No. 375 at 4:8; see also Reply All
Corp. v. Gimlet Media, LLC, 843 F. App'x 392, 395 (2d Cir. 2021);
The Sports Auth., Inc. v. Prime Hosp. Corp., 89 F.3d 955, 960 (2d
Cir. 1996).
Thus, the sole issue remaining in this litigation was
the disgorgement of defendants’ profits.
See ECF Nos. 391, 440-4
at 13.
G. Preparation for Trial on Disgorgement of Profits
Following the Court’s August 3, 2022 decision, plaintiff
sought to reopen discovery with demands on defendants that spanned
88 pages and contained 553 numbered paragraphs plus an additional
three pages titled “Document Request List.”
ECF No. 391; see also
ECF Nos. 382-390. On January 3, 2023 the Court granted defendants’
application for a protective order striking these demands and set
a trial date of July 10, 2023.
See ECF No. 391 at 2. 10
In advance
However, the Court further directed: “[t]o the extent that defendants have
failed to produce specific sales records created in the ordinary course of
business that were requested by plaintiff during fact discovery, defendants are
instructed to produce such records by January 13, 2023.” ECF No. 391. As such,
certain remaining sales records were produced by defendants in January 2023.
10
14
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of the bench trial, the Court directed plaintiff to “serve by
February
10,
defendants’
2023
an
expert
sales,
on
which
report
it
on
bears
the
the
single
burden
issue
of
of
proof”;
defendants to “serve by March 13, 2023 an expert report on all
elements of costs or deductions claimed, on which they bear the
burden of proof,” which “may also challenge plaintiff’s sales
figures”; and plaintiff to, “if it wishes to do so, serve a
rebuttal
expert
report
limited
to
the
elements
of
deductions claimed by defendants by April 14, 2023.”
costs
and
Id.
The
January 3, 2023 Order also directed that the parties shall make
the “data upon which each party’s expert(s) rely . . . available
to the other party prior to the depositions of the experts, which
will be concluded by May 15, 2023”; and to submit to the Court
proposed findings of fact and conclusions of law and any pretrial
memoranda no later than June 15, 2023.
Id. 11
On February 6, 2023, the Court denied defendants’ application for leave to
file an expert report to pursue an advice of counsel defense, which defendants
argued “goes to the issue of willfulness which, in turn, may be relevant in
mitigating the amount of damages awarded to plaintiff.” ECF No. 397 at 2; see
also ECF No. 406. The Court reasoned that “defendants cite no case authority
in this Circuit permitting an advice of counsel defense to reduce profits at
the disgorgement phase of a trademark case” and that “the issue of good faith
has already been resolved in the context of defendants’ own motion for summary
judgment.”
ECF No. 406 at 3-4.
On June 14, 2023, the Court also denied
defendants’ request for a Daubert hearing, given that “Daubert has a very
limited role in the non-jury context” and given that “plaintiff’s expert is a
forensic accountant whose testimony is derived from documents provided by
defendants.” See ECF No. 438 at 1.
11
15
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 16 of 52
LEGAL STANDARD
Before moving to this Court’s findings, we first provide the
legal
context
for
the
trial,
namely,
the
calculation
of
an
infringer’s profits under the Lanham Act.
A. Remedies Under the Lanham Act
Once
a
violation
of
the
Lanham
Act
is
established,
the
plaintiff is entitled:
subject to the principles of equity, to recover
(1) defendant’s profits, (2) any damages sustained by
the plaintiff, and (3) the costs of the action.
The
court shall assess such profits and damages or cause the
same to be assessed under its direction. In assessing
profits the plaintiff shall be required to prove
defendant’s sales only; defendant must prove all
elements of cost or deduction claimed. In assessing
damages the court may enter judgment, according to the
circumstances of the case, for any sum above the amount
found as actual damages, not exceeding three times such
amount. If the court shall find that the amount of the
recovery based on profits is either inadequate or
excessive the court may in its discretion enter judgment
for such sum as the court shall find to be just,
according to the circumstances of the case. Such sum in
either of the above circumstances shall constitute
compensation and not a penalty. The court in exceptional
cases may award reasonable attorney fees to the
prevailing party.
15 U.S.C. § 1117(a).
As
noted,
plaintiff
defendants’ profits.
4:5.
is
only
seeking
disgorgement
of
See Am. Compl. at 31-32; ECF No. 150 at 3:20-
In Romag Fasteners, Inc v. Fossil, Inc., the Supreme Court
clarified that a “showing of willfulness” is not a “precondition”
16
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 17 of 52
to awarding profits in trademark cases.
(2020).
140 S. Ct. 1492, 1496-97
Nevertheless, “a trademark defendant’s mental state is a
highly important consideration in determining whether an award of
profits is appropriate,” id. at 1497, as an “award of profits for
innocent
or
good-faith
trademark
infringement
would
not
be
consonant with the ‘principles of equity’ referenced in § 1117(a),”
id. at 1498 (Sotomayer, J., concurring).
of
good
faith
has
already
been
Here, however, the issue
resolved
in
the
context
of
defendants’ own motion for summary judgment, as noted supra at 1214.
See ECF No. 372 at 37-39.
Moreover, even if that issue had
not been resolved, willfulness has clearly been established here,
based on the same facts described in the Court’s August 3, 2022
decision.
See
id.
Accordingly,
an
award
of
profits
is
appropriate.
B. Sales
When an award of profits is appropriate, the plaintiff need
only prove the defendant’s sales, and the defendant bears the
burden of proving appropriate costs or deductions.
See 15 U.S.C.
§ 1117(a); ECF Nos. 137 at 8-9; 391 at 1; Am. Honda Motor Co. v.
Two Wheel Corp., 918 F.2d 1060, 1063 (2d Cir. 1990); Merck Eprova
AG v. Gnosis S.p.A., 901 F. Supp. 2d 436, 459 (S.D.N.Y. 2012),
aff’d, 760 F.3d 247 (2d Cir. 2014).
The law places the initial
burden on a plaintiff to prove sales, despite the fact that sales
17
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 18 of 52
information typically can be obtained only through discovery from
the infringer.
See 5 McCarthy on Trademarks § 30:66 (5th ed.).
C. Costs
Under the Lanham Act, while the plaintiff has the burden to
prove sales, the burden falls on the defendant to establish costs.
15 U.S.C. § 1117(a).
“Ordinarily, a plaintiff that has proved the
amount of infringing sales would be entitled to that amount unless
the defendant adequately proved the amount of costs to be deducted
from it.”
Am. Honda Motor Co., 918 F.2d at 1063.
The Circuits vary on what costs can be deducted, but this
Circuit applies the “full absorption” approach.
Warner Bros.,
Inc. v. Gay Toys, Inc., 598 F. Supp. 424, 428 (S.D.N.Y. 1984).
This approach permits the deduction of direct costs to produce the
infringing goods, as well as certain fixed costs, like overhead.
Id.
In order to deduct specific costs, the infringer “must prove
not only that it has borne the particular cost or expense but also
that the cost or expense is attributable to its unlawful sales.”
Manhattan Indus., Inc. v. Sweater Bee by Banff, Ltd., 885 F.2d 1,
7 (2d Cir. 1989).
For overhead costs, courts use a two-step analysis:
The court must first “determine what overhead categories
. . . are actually implicated by the production of the
infringing
product,”
a
process
that
requires
a
determination whether there is a “sufficient nexus
between a category of overhead and the production or
sale of the infringing product.” . . . The second step
18
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 19 of 52
is to determine “a fair, accurate, and practical method
of
allocating
the
implicated
overhead
to
the
infringement.” The infringer has the burden of offering
such a formula, which the court is to assess for
reasonableness, a determination that requires a caseby-case factual assessment.
Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp., 642
F. Supp. 2d 276, 290 (S.D.N.Y. 2009) (quoting Hamil Am. Inc. v.
GFI,
193
F.3d
original).
92,
105
(2d
Cir.1999))
(first
alteration
in
Moreover, “[w]hen infringement is found to be willful,
the district court should give extra scrutiny to the categories of
overhead expenses claimed by the infringer to insure that each
category
is
directly
and
validly
connected
production of the infringing product.”
to
the
sale
and
Hamil, 193 F.3d at 107.
That being said, disgorgement of profits remains an equitable
remedy. Thus, “even where the infringer failed to produce evidence
of either apportionment or cost deductions, to avoid a windfall to
the mark owner, the court may award its own estimate of what is a
fair recovery.”
5 McCarthy on Trademark § 30.66 (5th ed.).
D. Equitable Adjustment
Finally, “[i]f the court shall find that the amount of the
recovery based on profits is either inadequate or excessive,” the
court may make an equitable adjustment.
15 U.S.C. § 1117(a).
doing so, the Court can consider, for example:
In
“(1) the degree of
certainty that the defendant benefited from the unlawful conduct;
(2) the availability and adequacy of other remedies; (3) the role
19
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 20 of 52
of
a
particular
defendant
in
effectuating
the
infringement;
(4) any delay by plaintiff; and (5) plaintiff’s clean (or unclean)
hands.”
4 Pillar Dynasty LLC v. New York & Co., Inc., 933 F.3d
202, 214 (2d Cir. 2019).
Ultimately, the Court should consider
whether the “disgorgement of all profits attributable to the
infringing product is necessary to achieve the desired deterrent
effect.”
Id.
DISCUSSION
The trial began on July 10, 2023 and concluded on July 13,
2023, producing 702 pages of transcript. 12
During the course of
the trial, the Court heard testimony from the Vice President of
Finance at PPW, Kandiss Schulz (“Ms. Schulz”); and President of
The Court also heard expert
PPW, Oren Lewin (“Mr. Lewin”). 13
testimony from each side.
Rubin”),
who
is
the
Plaintiff called Beth Rubin (“Ms.
Managing
Director
in
the
Forensic
and
Litigation Consulting practice at FTI Consulting, Inc. and is a
certified public accountant (“CPA”).
See PX-01/DX-02.
Defendants
called Mr. David Duski (“Mr. Duski”), who is a Principal at Charles
River Associates and had previously provided financial consulting
“Trial Tr. _” refers to the trial transcripts, see ECF Nos. 461, 463, 465,
467.
12
The Court permitted Mr. Lewin to testify remotely without objection.
No. 453 at 2.
13
20
See ECF
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 21 of 52
services in connection with several commercial disputes.
03.
He is also a CPA.
See DX-
Id.
In advance of the trial the parties stipulated to 37 exhibits.
See ECF No. 457.
In addition, the Court received as direct
testimony five declarations of Ms. Schulz, see DX-49, DX-50, DX53, DX-54, DX-56; the declaration of Mr. Lewin, see DX-52; and the
reports of the experts, see PX-01/DX-02, DX-03, PX-02/DX. 14
The
Court then admitted an additional 53 exhibits during trial. 15
After the conclusion of the trial, the parties filed annotated
findings of fact and conclusions of law on July 28, 2023.
See ECF
No. 469-71.
The Court makes the following findings and conclusions based
on
the
exhibits
declarations
and
stipulated
expert
to
reports
prior
that
to
were
trial,
the
proffered
sworn
as
the
witnesses’ direct testimony, the testimony during the trial, and
exhibits admitted at trial.
14 PX-_ refers to plaintiff’s exhibits and DX-_ refers to defendants’ exhibits.
If a document was marked as both a plaintiff exhibit and defendants exhibit,
the Court refers to both markings when citing the exhibits.
There was some confusion during trial regarding the admission of exhibits to
the declarations of the defense witnesses, particularly the declarations of Ms.
Schulz. As a result, defense counsel identified and moved these documents into
evidence as exhibits to the underlying declaration (e.g., Ex K to DX-49), even
though defendants had separately identified some of these documents as
standalone exhibits in their pretrial exhibit list (e.g., DX-13, see ECF No.
457). Thus, for clarity and completeness, if a document was identified as both
an attachment to an admitted declaration and as a separate exhibit, the Court
provides both references in its opinion.
15
Further, to the extent that the Court refers to any evidence to which a party
objected, the objection is overruled.
21
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 22 of 52
A. Background
1. Operation of the Business
The trial on damages provided the Court with clarity on
defendants’ business operations for the first time in this sevenyear litigation.
which
they
Defendants own and run a family winery, through
produce,
market,
and
sell
wines
under
two
brands
relevant to this litigation –- the Peju brand and the Liana Estates
brand. 16 See Trial Tr. at 224:25-225:19. At the outset, defendants
operated a single winery founded in 1982 known as Peju Province
Winery at 8466 Saint Helena Highway, Rutherford, California, which
sold Peju-branded wines (“Peju Winery”).
Id. at 225:25-226:7.
The operations of the company originally fell under PPW, but, in
2012, a corporate restructuring transferred the operations of the
Peju Province Winery to the corporate operating company, PFOP.
Id. at 331:4-332:18.
A few years later, in 2016, defendants acquired a second
winery, known as Liana Estates Winery at 2750 Las Amigas Road,
Napa, California.
Id. at 226:4-7, 320:21-23, 342:5-12.
From that
winery, which opened to the public in October 2016, defendants
launched the LIANA brand.
Id. at 471:8-11.
Although the Liana
Estates Winery was a separate property, it was operated by the
same corporate operating partnership, PFOP.
Id. at 225:9-19.
As
It is the Court’s understanding that there may be other wine brands, but
those other brands are not the subject of this litigation.
16
22
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 23 of 52
a
result,
for
tax
purposes,
costs
and
revenues
properties were combined and reported under PFOP.
for
Id.
the
two
However,
for operational purposes, defendants maintained separate records
for each winery, which are discussed in detail below.
To
produce
the
Peju
and
Liana
Estates
Id.
branded
wines,
defendants either grew grapes at their own vineyards, namely Tess
Winery and Persephone, or purchased grapes, known as bulk wine,
from other vineyards.
Trial Tr. at 240:8-22, 246:9-247:15.
The
farmed grapes were harvested, crushed, and fermented in tanks,
while the bulk wine was delivered to defendants already crushed.
Id. at 246:15-247:14.
At that point, both types of wine were
further processed at the wineries and blended before being bottled
and stored.
Id.
Once produced, the wines were sold at tasting rooms 17 within
the two wineries, as well as through online sales, wholesale, and
through its wine club.
See id. at 252:2-11.
Throughout the course
of the trial, the Court heard evidence regarding how these wineries
operated, especially at the Liana Estates Winery.
The wineries
provided a chance for customers to sample the wines by purchasing
tastings, individual glasses, or bottles.
Id. at 322:8-323:1.
The tasting room is contained within the winery, and can be thought of as a
register.
See id. at 207:25-208:13.
The witnesses and parties often used
“tasting room” and “winery” interchangeably to refer to the physical locations
in Napa and Rutherford, California. For simplicity, the Court refers to each
location as a “winery,” unless otherwise noted.
17
23
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 24 of 52
Customers
could
also
drink
the
wines
wineries.
Id. at 321:4-9, 322:8-323:1.
at
events
held
at
the
2. Records Maintained
In operating their business in the normal course, defendants
maintain their records in a system called “Advanced Management
Systems” or “AMS.”
of
software
including
that
ones
Id. at 201:8-10; DX-49 ¶ 5.
includes
for
25
vineyard
modules
This is a suite
designed
management,
for
winemaking,
wineries,
bottling
supplies, general inventory, order processing, sales analysis,
purchasing, accounts receivable, tasting room cash register, and
general ledgers.
DX-49 ¶ 5.
The system helps maintain records
that are needed for reporting to the Alcohol and Tobacco Tax and
Trade Bureau.
Id. ¶ 6.
Information is recorded and stored in
this system and then queries are run to generate specific reports
or cuts of the data.
Id. ¶ 10.
When a report is generated in
this way, the set-up sheet that precedes the report indicates the
specific inputs used to run the query.
Defendants
individual wines.
record
information
See id. ¶ 16.
within
the
system
for
Each wine is assigned a 5-digit part or SKU
number, with the first two digits representing the year and the
next three digits indicating the varietal.
210:10-18.
See Trial Tr. at
The system then tracks sales for each wine.
Because
it is a point-of-sale system, when a sale is made online or at a
tasting room, it is immediately and automatically logged in the
24
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 25 of 52
system.
DX-49 ¶ 9.
Similarly, wholesale wine sales are entered
into the system after receipt of the purchase order.
Id.
In addition to sales, AMS contains data on bottling and
inventory.
See Trial Tr. at 202:8-17, 250:9-14.
For example, the
trial record contains the inventory report for SKUs 13450 and 14450
as of November 30, 2018, showing the number of bottles stored in
inventory on that date.
See PX-3; PX-4/DX-9.
Finally, within AMS, defendants also maintain information
regarding the costs to produce and sell the wines, and the costs
to operate the tasting rooms.
To do so, invoices or receipts are
logged into the system and assigned to a cost center.
at 252:12-253:8.
Trial Tr.
From there, AMS is used to generate profit and
loss statements (“P&L Statements”).
These are run on a monthly
basis for each winery, see DX-3 at 51, and can either be generated
with or without production costs.
When the P&L Statements are
labeled “No Production,” it means that only the costs to produce
the wines that were sold in that year were included.
Id.
B. Calculation of Sales Revenues
Prior to trial, plaintiff and defendants prepared expert
reports which calculated infringing sales at $5,406,330 18 and
$1,819,612, respectively.
PX-01/DX-02 at 3; DX-03 at 41.
The
large difference in their calculations is attributable to four
In Ms. Rubin’s rebuttal report, she reduced the total gross sales to
$4,560,629 after deducting discounts. See PX-02/DX-04.
18
25
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 26 of 52
main disputes:
(1) which specific wines should be included in
revenue calculations; (2) whether the sales records are incomplete
and plaintiff should be able to recover for “unaccounted for”
bottles; (3) whether sales after July 2018 should be considered
infringing sales; and (4) whether the revenues from tasting fees
or event fees are recoverable.
We address each in turn.
1. Relevant SKUs
As noted, the Court has already determined that the wines
that included “LIANA” on the front or back of the bottle were
infringing.
Accordingly, the Court finds that the Peju Late
Harvest Orange Muscats (SKUs 13450, 14450, and 15450), which
contained the word “LIANA” on the front of the label, below the
Peju logo, were infringing (“Peju Branded Infringing Wines”), see
DX-52 ¶ 8, as were the vast majority of the wines sold at the Liana
Estates Winery, which did not contain a winery name on the front
of the label, but contained “LIANA Estates” on the top of the back
label (“Liana Estates Branded Infringing Wines”).
Given the
Court’s prior holdings, the parties’ experts calculated revenues
for all of these wines.
The core dispute between the parties with respect to the scope
of infringing wine is whether sparkling wines sold by defendants
were infringing.
infringing
Plaintiff argues that three sparkling wines are
because,
during
her
deposition,
Ariana
Peju
(“Ms.
Peju”) was shown a list of wines prepared by plaintiff’s counsel
26
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 27 of 52
and Ms. Peju did not strike the sparkling wines from the list at
that time and never retracted her testimony. Pl. Proposed Findings
of Fact ¶ 61, ECF No. 471; PX-50-1. 19
From the evidence presented at trial, however, the Court finds
that the sparkling wines identified by plaintiff did not include
the word “LIANA” on the bottle and thus were not infringing.
Trial Tr. at 481:8-14.
Ms. Schulz noted that defendants did not
bottle sparkling wine or possess a license to do so.
at 8.
See
See DX-54
While Ms. Peju may have been shown the list that plaintiff
relies upon, subsequent testimony of Ms. Schulz clarified that the
bottles of sparkling wine bottled by a third-party vendor, who
labeled the sparkling bottles as either Peju or Carneros, not
Liana.
DX-54 at 8.
We credit Ms. Schulz’s testimony.
With this in mind, the Court does not award revenues for the
sparkling wines.
Appendix A lists all of the infringing wines
(“Infringing Wines”) and their assigned SKUs.
2. Sufficiency
of
Sales
Records
and
Unaccounted
for
Bottles
The
largest
calculations
challenged
of
the
driver
Ms.
Rubin
of
the
and
completeness
difference
Mr.
of
Duski,
sales
in
is
records
the
that
revenue
Ms.
Rubin
maintained
by
19 The list admitted into evidence as PX-50-1 is a list of 16 “Liana Wines
Currently Known to Plaintiff” at the time of Ms. Peju’s deposition. During the
deposition, Ms. Peju crossed out some of the wines, but did not cross out the
sparkling wines listed.
27
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 28 of 52
defendants in the AMS system.
that
because
“defendant
See PX-01/DX-02.
does
not
Plaintiff argues
competently
account
for
infringing products that the defendant produced or acquired,” it
can seek revenues from every bottle that was ever produced.
Proposed Findings of Fact ¶ 42.
Pl.
On the other hand, Mr. Duski only
calculated revenues for the sales documented in the AMS Sales
Reports.
See DX-03.
Testimony at trial established how sales of the Infringing
Wines occurred and how they were recorded.
Bottles of Infringing
Wines were sold at the two physical wineries, through online and
phone sales, through the wine club, and through wholesalers.
Trial Tr. at 252:2-11.
See
In addition, Ms. Schulz testified that
some of the wines were available by the glass at the Liana Estates
Winery.
Id. at 324:2-9.
All of these sales were recorded in the AMS system.
Tr. at 252:2-11.
See Trial
The Court understands that PX-16/DX-25 and DX-
33 represent all bottle sales for the Peju Branded Infringing
Wines. 20
DX-29
Similarly, PX-10/DX-18, PX-12/DX-20, PX-14, DX-22, and
(collectively,
“AMS
Sales
Reports”
or
“Sales
Reports”)
include all sales for the Liana Estates Branded Infringing wines.
PX-16/DX-25 and DX-33 show the same information, but PX-16 includes a longer
time period and includes SKU 15450PP, which is discussed in more detail in the
following section.
20
Additionally, for clarity of the record, the Court notes that defendants
attempted to admit PX-16 as Exhibit B to DX-53.
28
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 29 of 52
Occasionally, discounts were offered on the wines for employees or
members of the wine club, see DX-3 at 23, which were included in
the AMS Sales Reports (“Sales Reports”).
Both parties agree that
the revenues defendants received were the gross sales net of
discounts.
Based on the evidence presented as part of trial, the
Court has no reason to doubt the accuracy of the Sales Reports,
which predate the litigation, were maintained in the regular course
of business, and, in particular, were entered automatically at the
point-of-sale. 21
Nevertheless,
plaintiff
challenges
the
accuracy
and
completeness of the Sales Reports because plaintiff claims that
the Sales Reports do not align with the number of bottles Ariana
Peju previously testified were produced and because there are
slight discrepancies between the inventory and sales figures.
See
Pl. Proposed Findings of Fact ¶ 44.
However, both arguments fail to meaningfully challenge the
validity of the Sales Reports.
First, the testimony of Ms. Peju
was later modified and corrected by Ms. Schulz, who the Court finds
has consistently provided credible testimony. 22
DX-54 ¶¶ 30-39.
Plaintiff never raised an argument that the data in AMS was not entered in
the normal course of business. We find these records to be admissible evidence
under Federal Rule of Evidence 803(6).
21
Plaintiff claims that defendants are improperly using Ms. Schulz’s testimony
as a sword and a shield (i.e., seeking to protect documents Ms. Schulz provided
Ariana Peju in preparation for a deposition while also affirmatively testifying
to correct the evidentiary record). Pl. Proposed Findings of Fact at 19 n. 28.
There is no indication that there is a basis for that argument.
The Court
previously ruled that the compilation of materials prepared by Ms. Schulz for
22
29
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 30 of 52
Second, the discrepancy between inventory and sales numbers is
miniscule.
For example, plaintiff’s expert, Ms. Rubin, highlights
that for SKU 14450, defendants’ AMS data shows that 6,480 bottles
were
produced,
inventory.
and,
as
of
PX-1 at 8-9.
2021,
3,405
bottles
remained
in
The difference between the production
and inventory should, in a perfect world, equal sales.
Here, the
difference between production and inventory is 3,075 bottles,
which is 58 bottles more than the number of bottles reflected in
the Sales Reports (3,017 bottles).
This means that less than one
percent of the bottles of SKU 14450 produced were not accounted
for by the inventory or sales data. 23
The Court does not find that
this is a convincing reason to question the validity of the Sales
Reports, let alone entirely disregard them.
Ms. Schulz further
testified that it is normal for inventory to show small shortages
or surpluses.
Trial Tr. at 383:2-4.
Moreover, the caselaw plaintiff cites to justify the recovery
of
revenues
distinguishable.
for
the
For
unaccounted
instance,
bottles
plaintiff
is
relies
readily
on
Chesa
Ms. Peju to review prior to her deposition were privileged work product.
Although those documents prepared by Ms. Schulz were protected by the work
product doctrine, there is no evidence that any document in that compilation
which was otherwise a business record subject to discovery was independently
withheld.
Ms. Rubin performs a similar analysis for SKU 13450. This
comparable discrepancy. She acknowledges that 5,892 bottles
produced and there were 1,112 left in inventory. See PX-1 at
sales records only show that 4,699 bottles were sold, leaving
81 bottles. Id.
23
30
analysis shows a
of the wine were
6. However, the
a discrepancy of
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 31 of 52
International, Ltd. v. Fashion Assocs., Inc., 425 F. Supp. 234
(S.D.N.Y. 1977), in which defendant produced only eleven invoices
purporting to show the possible infringing sales and was ultimately
sanctioned for its failure to produce relevant documents.
Still,
in Chesa, the court did not allow plaintiff to recover for every
item produced; instead, the court awarded revenues for all sales
reflected in the invoices, even though defendant claimed, without
evidence, that some of the items reflected in the invoices did not
actually contain the infringing mark. 425 F. Supp. at 238; see
also Deering, Milliken & Co. v. Gilbert, 269 F.2d 191, 193 (2d
Cir. 1959) (allowing recovery when defendant was evasive, was
“unworthy of belief,” and produced no evidence of sales); GTFM,
Inc. v. Solid Clothing, Inc., 215 F. Supp. 2d 273, 304 (S.D.N.Y.
2002) (awarding damages for sales without style number or date in
the
record
because
defendant
discovery process”).
“systematically
obstructed
the
The only case cited by plaintiff which
allowed recovery for sales beyond recorded sales was With Love
Designs Inc. v. Dressy Tessy Inc., No. 91-cv-4717 (RPP), 1992 U.S.
Dist. LEXIS 15629 (S.D.N.Y. Oct. 9, 1992).
However, there, the
defendant admitted that it sold all of the goods in its inventory,
contradicting the records.
Id. at *8.
Here, defendants have produced detailed sales records that
were
kept
in
the
normal
course
of
business,
have
not
been
sanctioned for obstructing discovery, and have not admitted to
31
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 32 of 52
selling any additional inventory. 24
And as just discussed, the
inventory records produced show that, for the SKUs reflected in
the inventory data, practically all of the “unaccounted” bottles
were accounted for in inventory.
Even if plaintiff had proven
that the Sales Reports were incomplete, which it has not, it would
still not justify the assumption that every bottle ever produced
was sold.
Plaintiff’s argument assumes, contrary to any business
reality, that companies can perfectly calibrate production to
demand and sell all of their inventory.
No matter how hard
plaintiff tries, the record simply does not match the narrative it
urges.
Therefore, the Court determines that the Sales Reports are
the appropriate record of bottles sold and the Court does not award
revenues for the so-called “unaccounted for bottles.” 25
3. Time Period of Infringing Sales
Even after determining the infringing SKUs and the relevant
records of sales, a dispute remains regarding the time period of
infringing sales.
Defendants only include sales until July 2018,
While plaintiff at one point moved for sanctions, see ECF No. 256, the Court
in fact did not impose sanctions, see ECF No. 289 at 176:10-25.
24
With regards to SKU 15450L, while Ms. Rubin acknowledges that there are no
sales, she nonetheless seeks revenues for the produced bottles. See PX-01/DX02.
Consistent with our general ruling to not award revenues for unaccounted for
bottles, we do not award any revenue for SKU 15450L. Further, in this particular
case, Ms. Schulz credibly testified as to why bottles of this wine were produced
but not sold, namely that it was a “shiner,” meaning that it was bottled and
not labeled, and thus there was a delay in offering these wines for sale. DX54 ¶ 17.
25
32
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 33 of 52
because they maintain the bottles were relabeled and any sales
after that date did not include “LIANA” on the bottle.
15-16.
DX-03 at
However, plaintiff argues that this is contradicted by the
sales records themselves, which show sales for some infringing
SKUs after July 2018.
Pl. Proposed Findings of Fact ¶ 69.
Based
on the testimony at trial, the Court finds no contradiction.
During the course of this litigation, defendants eventually
ceased selling wines with “LIANA” on the bottle.
In 2018, the
wines were either relabeled, dumped back into tanks to be made
into Peju or Calmere wines, or dumped into storage tanks to be
bottled at a later date.
DX-52 ¶ 23.
As explained through the
credible testimony of Ms. Schulz and Mr. Lewin, defendants began
the
relabeling
process
Infringing Wines.
first
for
the
Liana
Estates
Branded
Trial Tr. at 273:8-274:5; 681:25-682:13.
The
reason for the initial emphasis on the Liana Estates Branded
Infringing Wines was that there were more of these infringing wines
than
Peju
Branded
ones,
and
the
Infringing Wines were much slower.
sales
of
the
Peju
Branded
See id. at 273:8-274:5.
Thus,
to quickly ensure that no infringing sales would occur, according
to Mr. Lewin, defendants began relabeling wines for Liana Estates
in May 2018, and finished on July 23, 2018. 26
DX-52 ¶ 21.
During Ms. Schulz’s testimony, she stated that the relabeling began in July
2018. Trial Tr. 273:8-10. Whether the relabeling began in May or July is not
material to the Court’s ultimate calculation of profits.
26
33
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 34 of 52
The testimony of Ms. Schulz established that when defendants
stopped selling the Liana Estates Branded Infringing Wines, the
wines were selected for relabeling or, if not relabeled, were
sequestered in defendants’ warehouse, put on pallets, shrinkwrapped, and marked with a sign stating “do not sell.”
Trial Tr.
at
that
308:19-309:10.
Further,
Ms.
Schulz
testified
she
personally checked the bottles in the warehouse in late 2018 to
confirm relabeling had, in fact, occurred. 27
Id.
It is significant for our purposes that after a wine was
relabeled, defendants continued to use the same SKU number.
273:4-7.
Id.
Therefore, the system continued to use the same 5-digit
identifier even though the bottle no longer contained the word
“LIANA” on it.
As such, the Court finds that revenues shown for
infringing SKU numbers after July 2018 do not represent sales of
Infringing Wines, because they contained a new label that did not
use the “LIANA” name. 28
Plaintiff routinely challenged the witness testimony regarding the relabeling
process. While again, the Court found the testimony of Ms. Schulz and Mr. Lewin
credible, the Court notes that in 2018 plaintiff had the option to demand
inspection of defendants’ warehouse to view the relabeled goods under Federal
Rule of Civil Procedure 34, but never did so. Further, plaintiff’s arguments
that the new labels were not produced is hollow without pointing to a discovery
request or a motion to compel seeking that information. Plaintiff cannot bury
its head in the sand and then complain to the Court that it cannot see.
27
At trial, plaintiff entered into evidence Exhibit PX-22A, which showed
revenues for some SKU numbers associated with the Liana Estates Infringing Wines
after July 2018. PX-22A. Given the credible testimony regarding the relabeling
and the fact that defendants continued to use the same SKU after relabeling,
the Court dismisses plaintiff’s argument that the sales shown by PX-22A after
July 2018 for SKU numbers previously associated with infringing wines discredit
the validity of the Sales Reports. The Court also notes that while plaintiff
relies on PX-22A to justify its desire to seek revenues for “unaccounted for”
28
34
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 35 of 52
For the wines that were not relabeled at the Liana Estates
Winery, some were dumped into other wine tanks or storage tanks.
DX-52 ¶¶ 23-24.
But, this was not done all at once because there
was limited space and the wine degrades in some of these tanks.
Id.
The trial record contains some limited records showing that
wines were in fact dumped.
See DX-55/DX-54, Ex. K.
In the
meantime, the Peju Branded Infringing Wines were pulled from
inventory and isolated in the warehouse.
Trial Tr. at 272:15-21.
The Peju Branded Infringing Wines were relabeled beginning in 2019.
Id. at 677:14-15.
Ms. Rubin includes in her revenue calculations sales of SKU
15450PP and 14450 after July 2018.
PX-01/DX-02 at 7-11.
For SKU
15450PP, the 2015 Liana Late Harvest Orange Muscat, the record
established that that wine was bottled but never sold with an
infringing label.
DX-52 ¶ 12.
Both the Sales Reports and the
testimony of Mr. Lewin showed that the wine was not sold before
July 2018.
See DX-52 ¶ 12; PX-16/DX-25.
The wine was then
relabeled in December 2019, and the first sale of the wine occurred
on December 10, 2019.
DX-52 ¶¶ 14, 18.
Despite having a new
label, the wine continued to use the same SKU number, 15450PP,
within the system.
See id. ¶¶ 16, 18.
bottles, Ms. Rubin did not include the revenues shown in PX-22A in her initial
or rebuttal report. This contention appeared for the first time on the day of
trial.
35
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 36 of 52
However, the record established that the 2014 Liana Late
Harvest Orange Muscat, SKU 14450, was not relabeled, and instead
a “hold” was placed on the SKU within AMS.
265:22.
Trial Tr. at 264:5-
This hold was meant to prevent any additional sales.
53 ¶ 13; DX-52 ¶ 11.
DX-
That being said, a Sales Report that included
sales of SKU 14450 for the remainder of 2018 showed an additional
eight bottles were sold after July 2018, resulting in an additional
$104 in revenue. 29
PX-16/DX-25; DX-33.
Because the testimony
established that this wine was not relabeled, the Court finds the
eight additional sales of this wine were infringing.
Given the record, the Court awards revenues for the sales of
infringing wines as referenced in the Sales Reports until July
2018, with the exception of SKU 14450.
The revenues awarded by
SKU are listed in Appendix A.
4. Event and Tasting Fees
Finally,
the
parties
disagree
regarding
the
recovery
tasting and event fees earned at the Liana Estates Winery.
of
In
their calculation of revenues, defendants include over $500,000
from events and tastings.
not seek these revenues.
DX-03, Ex. 5.1.
Plaintiff however does
PX-02/DX-04 at 9.
Eight additional bottles were sold in 2018. In addition, five bottles were
marked in the Sales Report for 2019 and 2020, but there was no revenue associated
with those bottles. See PX-16/DX-25. According to Ms. Schulz, this represents
that a bottle was removed from inventory and “no-charged,” which represents the
use of the bottle without a sale, like a giveaway. Trial Tr. at 209:13-20.
29
36
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 37 of 52
The record establishes that between 2014 and July 2018, Liana
Estates earned $280,991 in revenues from tasting fees.
5.12.
DX-03, Ex.
It is the Court’s understanding that at tastings, pours of
several Liana Estates Branded Wines were given to customers to try
for a flat fee.
See Trial Tr. at 376:16-20.
Tastings included a
discussion with a wine educator and sometimes food. Id. at 376:21377:4,
379:4-8.
The
record
however,
does
not
contain
any
information regarding which wines or even how many were served in
a tasting.
The record also shows that Liana Estates earned $236,348 from
“event fees.”
DX-03, Ex. 5.13.
However, even after the four-day
trial, it is unclear what was included in these events.
Ms. Schulz
testified that for the events the “director of experience” works
with the guests to craft a menu and selects wines for a flat per
person fee.
See Trial Tr. at 328:10-329:10.
From the record
presented, it is unclear how much wine, let alone infringing wine,
was served at these events.
Based on the information presented, the Court has no way to
determine the percentage of the revenues from tasting or event
fees attributable to the Infringing Wines.
Further, plaintiff
does not actually seek to recover these revenues.
Therefore, the
Court declines to award revenues for events and tastings.
37
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 38 of 52
5. Total Sales Awarded
As stated above, the Court finds that the sales shown in the
AMS Sales Reports constitute the sales of Infringing Wines prior
to July 2018.
The total sales for each infringing SKU are shown
in Appendix A. 30
in
bottle
sales
Overall, the Court finds that there are $330,002
(wholesale
and
retail)
of
the
Peju
Branded
Infringing Wines, and $732,686 for the Liana Estates Branded
Infringing Wines.
In addition to bottle sales, there was testimony that glasses
of infringing wine were sold at the Liana Estates Winery.
Trial Tr. at 324:2-11.
See
The Court believes for the same reasons
that bottle sales are recoverable, so are the by-the-glass pours.
As such, the Court includes the $8,191 of by-the-glass revenues
contained in DX-18, DX-20, DX-22, and DX-29 in its total revenues,
as shown in Appendix A.
Therefore, the total revenue from the
sale of all Infringing Wines is $1,070,879.
C. Calculation of Costs
Having determined the revenue from the sale of Infringing
Wines, the burden shifts to defendants to prove deductible costs.
Not only must defendants prove that they incurred specific costs,
they must also prove that the costs were related to the sale of
the Infringing Wines.
Manhattan Indus., 885 F.2d at 7.
Both experts ultimately agree that deducting the discounts from the gross
sales is proper. Therefore, the Court also deducts the discounts shown in the
Sales Reports.
30
38
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 39 of 52
Once again, the parties vastly disagreed on this calculation.
In his expert report, Mr. Duski sought to deduct the cost of goods
sold,
overhead
expenses
included
wineries, and excise taxes.
in
See DX-03.
P&L
statements
for
the
Plaintiff challenged each
of these, but did not otherwise suggest a more appropriate number.
See PX-02/DX-04.
The Court evaluates each category of cost below.
For the reasons below we award the costs reflected in Appendix B,
which include direct costs and excise taxes.
First, defendants seek to deduct $641,018 in direct costs for
the wines sold and for the tastings. 31
DX-03, Ex. 3.0.
For the
wine sales, this number is derived from the “cost of goods sold”
(“COGS”) calculated by defendants’ accountants.
Trial Tr. at
562:7-11; DX-03 at 42.
Ms. Schulz and Mr. Duski testified that COGS is a standard
accounting principle, typically prepared by accountants, and the
best measure of direct costs.
570:5-10.
Trial Tr. at 543:2-17; 562:7-11,
In the wine context, it includes the cost to grow or
buy the grapes, bottles, corks, costs related to processing, costs
related to storing and aging the wines, and costs related to
bottling and labeling the wines.
See id. at 543:2-17; DX-3 at 42-
43.
Because the Court does not award revenues related to tastings and events, we
need not evaluate defendants’ calculation of costs related to those events.
31
39
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 40 of 52
Unfortunately,
neither
side
chose
to
call
an
accountant
specializing in wine as an expert, which would have been helpful
in a disgorgement analysis. Nevertheless, the Court found credible
the testimony of Ms. Schulz that these calculations were part of
routine
accounting
practice
accounting standards.
and
done
in
compliance
with
the
Ms. Schulz testified that the cost of goods
sold included the grape or bulk wine cost, cellar costs, and
bottling costs (i.e., glass, corks, and labels).
543:2-17.
See Trial Tr. at
It also included an allocation for the square footage
of the cellar devoted to these wines. 32
Id.
However, the measure
excluded costs related to production of future wines.
18.
Id. 320:1-
Additionally, Mr. Duski testified that in using the cost of
goods metric, his conversations with Ms. Schulz describing how the
number
was
generally
calculated
accepted
comported
accounting
with
his
practices.
understanding
Id.
at
of
562:7-11.
Originally, the figure was prepared by an external accountant, and
then sometime in 2019 or 2020, defendants calculated the cost of
goods sold themselves, and that calculation was then reviewed and
signed off by an external accounting firm.
See Trial Tr. at
543:20-544:19.
On his cross examination, Mr. Duski referred to this “indirect” cost as
“manufacturing overhead” and testified that it is included in the cost of goods
sold under generally accepted accounting principles.
Id. at 569:12-23 (“I
deducted all the manufacturing overhead because by definition they are tied
directly to the sale of the complained of wines otherwise they would not be
included as a component of cost of goods sold.”).
32
40
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 41 of 52
The record contains the cost of goods sold for the Peju
Branded Infringing wines by SKU.
DX-11/DX-49, Ex. I; DX-34.
However, for the Liana Estates Branded Infringing Wines, the cost
of goods sold was not produced for each infringing SKU.
Tr. 544:20-25.
the
wines
Instead, the aggregated cost of goods sold for all
sold
Statements.
See Trial
at
Liana
Estates
was
contained
in
See DX-13/DX-49, Ex. K; DX-14; DX-30.
the
P&L
These P&L
Statements were run monthly and were reviewed by the management
team to analyze the performance of the business.
DX-3 at 51.
From
this Mr. Duski argues that you can calculate the cost of goods
sold for only the infringing wines by multiplying the cost of goods
sold in the P&L Statements by the ratio of infringing sales to all
sales in each year at Liana Estates.
Plaintiff
however
“unexplained.”
challenges
PX-02/DX-04 at 12.
Id.
the
cost
of
goods
sold
as
The Court finds this argument
insufficient to challenge the record evidence of the cost of goods
sold.
While the underlying formula was not disclosed, both Ms.
Schulz and Mr. Duski explained the accounting process used to
calculate the cost of goods sold and the categories of costs
included.
Id.
at
543:2-17,
562:7-11.
Further,
plaintiff’s
comparison to Judge Furman’s decision in Coty Inc. v. Excell
Brands, LLC, 277 F. Supp. 3d 425 (S.D.N.Y. 2017) misses the point.
Pl.
Proposed
ultimately
Findings
rejected
of
the
Fact
cost
¶¶ 77-80.
of
41
goods
While
sold
Judge
included
Furman
in
P&L
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 42 of 52
statements when calculating infringer’s profits, it was not a
general attack on this metric or on P&L statements. Instead, Judge
Furman
believed
that
the
P&L
statements
themselves
were
“inaccurate and unreliable,” because witnesses admitted that the
statements were later revised when reviewed by outside accountants
and a sufficient foundation had not been laid.
Id. at 466-467.
No similar testimony or basis to challenge the P&L Statements
exists here.
Second, as discussed previously, the caselaw distinguishes
between direct and indirect costs, applying a more stringent
standard to recovery of indirect costs.
As a result, plaintiff
challenges the cost of goods sold used by defendants because it
contains some overhead costs in its calculation.
566:11-569:13.
See Trial Tr. at
However, both Ms. Schulz and Mr. Duski testified
that overhead cost included in the cost of goods sold is the
allocation for the square footage of the facility used to produce
the wine, in compliance with the standard accounting practice and
calculated independent of this litigation.
569:11-17.
since
this
Id. at 543:2-17,
The inclusion of this cost does not taint the metric,
is
precisely
the
type
of
overhead
cost
that
is
recoverable, as it is tied to the production of the infringing
product.
Third,
plaintiff
finds
fault
with
the
use
of
the
P&L
Statements that aggregate the cost of goods sold for the Liana
42
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 43 of 52
Estates Winery.
The Court understands that the cost of goods sold
within the Liana Tasting Room P&L Statement 33 is the aggregated
amount of the cost of goods metric discussed earlier for all wines.
However, the Court has no reason to question the P&L Statements
that were generated in the normal course of running the wineries. 34
Therefore, multiplying the total cost of goods sold in the P&L by
the percentage of wine sales from Liana Estates Branded Infringing
Wines is a sufficient methodology to allocate evidence of direct
costs. 35
Therefore, the direct costs associated with the Liana
Estates Branded Infringing Wines are $374,459.
Overall, we find that defendant has properly demonstrated a
total of $396,053 in direct costs for all Infringing Wines (Peju
Branded and Liana Estates Branded Infringing Wines).
1. Overhead Costs
Finally, defendants presented evidence regarding overhead
costs.
Mr. Duski argues that we should deduct over $2 million in
The P&L Statements refer to “Tasting Rooms,” however as noted earlier in
footnote 17, the Court believes this refers to the physical wineries.
Therefore, for consistency, this P&L refers to the Liana Estates Winery.
33
Throughout the trial, plaintiff questioned the validity of the P&L Statements
by arguing they must have been produced for this litigation as defendants
include both wineries under PFOP when reporting taxes. Plaintiff fundamentally
misunderstands the difference between business documents created for tax
purposes and those created to operate a business. Testimony established that
defendants collect revenues, costs, and profits at each winery which are then
rolled up into a single entity for taxes. Trial Tr. at 335:16-336: 17. There
is nothing nefarious in monitoring the business at a more granular level than
is required for tax reporting.
34
This is particularly appropriate because the vast majority of wine sales were
infringing. See Appendix B.
35
43
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 44 of 52
overhead costs.
DX-03, Ex. 3.0.
To calculate this figure for the
Peju Winery, Mr. Duski relied on the costs in a 2017 P&L Statement
for the Peju Tasting Room, and then followed the guidance of
Ms. Schulz to allocate 20 percent and 50 percent of the net sales
for “Fixed Admin Benefits” and “Tasting Room Costs,” respectively.
DX-3 at 46-48, Exhibit 4.2.
In calculating the “Fixed Admin
Benefits,” there was no testimony regarding the type of employees
included, their role in the company, and their connection to the
Infringing Wines.
Similarly, Mr. Duski largely regurgitated Ms.
Schulz’s analysis to calculate the “Tasting Room Costs” without
providing further explanation linking the costs and the infringing
products.
See DX-3, Exhibit 4.2, ns. 2, 3, 5,
Defendants adopted a different approach for the Liana Estates
Winery.
Here, Mr. Duski attempted to deduct practically every
line item on the P&L Statements for the Liana Estates Winery.
This
included categories such as “Salaries and Wages” and “Supplies,”
as well as more nebulous categories like “General Expenses,”
“Outside Serv / Consulting Fees,” and “Travel and Entertainment.”
See
DX-3,
Exhibit
5.14.
However,
there
was
no
additional
explanation provided for these categories, and when questioned in
Court, Mr. Duski at times was unaware of what was captured by the
categories.
See Trial Tr. at 615:9-14 (“Q:
Do you know what the
outside service and consulting fees include? A:
As I sit here
right now, I don’t have an exact definition for you.
44
I do know
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 45 of 52
that they are directly attributable to the Liana brand or else
they would not have appeared on this profit and loss statement.”)
Plaintiff challenges the overhead costs as not sufficiently
related to the Infringing Wines, and the Court agrees.
Mr. Duski
has failed to link any of the overhead cost categories to the
production of the Infringing Wines and at times could not explain
what was captured by the specific cost categories.
Simply, there is an insufficient nexus between the overhead
costs and the infringing goods.
Use of broad categories which are
not described “beyond a one- or two-word label . . . make it
impossible for the court -- even if we disregarded defendant’s
burden of proof – to determine the nature of the linkage of the
cost category to the sale of [infringing] goods.”
F. Supp. 2d at 293.
Fendi, 642
This problem is even more serious here; since
the Court has already found the infringement to be willful, the
caselaw requires the Court to be more discerning when deciding
whether
to
award
overhead
costs.
Hamil,
193
F.3d
at
107.
Defendants have failed to meet their burden on the first step of
the overhead cost analysis.
Thus, the Court need not analyze
whether the allocation methodology was proper.
2. Excise Taxes
Finally, defendants maintain that they should be permitted to
deduct
excise
taxes.
Mr.
Duski
noted
in
his
analysis
that
California imposes an excise tax on the sale of beer and wine.
45
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 46 of 52
DX-3 at 52.
As such, the excise taxes are directly related to the
sale of the infringing wine.
The excise taxes are reported for
the Liana Estates Winery in its P&L Statement.
Id.
Using the
same methodology as Mr. Duski, the Court allocates a portion of
those excise taxes to the sales of Infringing Wines and tasting
fee revenue, as shown in Appendix B.
Overall, the Court finds
defendants paid $8,612 in excise taxes on the infringing wine
sales.
While federal income tax is often not deducted in disgorgement
analyses, the Court has the discretion to deduct excise taxes.
McCarthy on Trademarks § 30:67 (5th ed.).
5
The tax here is a state
tax that is levied on the sale of the exact infringing products at
issue.
Thus, the Court holds it is proper to deduct the excise
taxes related to the sale of Infringing Wines.
D. Profits and Equitable Adjustments
Given the findings above, we award plaintiff a total of
$666,214 in profits, as shown in Appendix C.
Defendants then urge the Court to make an equitable adjustment
to the award of profits to further reduce the award.
Findings of Fact ¶ 139, ECF No. 469.
Def. Proposed
The Lanham Act permits an
equitable adjustment “[i]f the court shall find that the amount of
the recovery based on profits is either inadequate or excessive”
and thus “the court may in its discretion enter judgment for such
sum as the court shall find just, according to the circumstances
46
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 47 of 52
of the case.”
15 U.S.C. § 1117(a).
Defendants argue that because
“there is no evidence in the record of actual confusion,” the Court
should decrease the award.
Def. Proposed Findings of Fact ¶ 139.
However, the Court in evaluating the award in its equity power can
also consider the actions of defendants, including that they
continued to sell the Infringing Wines after receiving a ceaseand-desist letter and after the initiation of this lawsuit, which
resulted in our finding of bad faith in response to a motion for
summary judgment.
See supra at 6-7, 12-14; ECF No. 372 at 37-39.
With that in mind, the Court finds that the award of $666,214 is
not excessive and declines to make any equitable adjustment.
CONCLUSION
For the reasons stated above, the Court awards profits in the
amount of $666,214.
It is hereby ordered that the deadline for plaintiff to file
a motion for attorneys’ fees and costs, if any, is October 20,
2023.
That application shall include: (i) caselaw support for
plaintiff’s
application
demonstrating
that
this
action
is
an
exceptional case; (ii) a sworn declaration providing each attorney
and legal support staff’s background, experience, and billing rate
at the time the work was expended; (iii) copies of contemporaneous
time sheets that include the date, hours expended, and nature of
work completed, specifically noting the filings or motions that
were worked on in that entry; (iv) a chart aggregating the fees
47
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 48 of 52
and costs sought by plaintiff to each stage of the litigation
(e.g.,
particular
depositions
taken,
motions,
court
letters,
appearances
deposition
and
preparation,
related
preparation,
etc.); (v) a chart describing any costs sought by plaintiff; and
(vi) a chart detailing the attorneys’ fees and costs already paid
by
plaintiff
submission. 36
and
those
outstanding
as
of
the
date
of
the
If necessary, the deadline for defendant to file an
opposition to plaintiff’s motion is October 20, 2023.
SO ORDERED.
Dated:
New York, New York
September 22, 2023
____________________________
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
The Court reminds the parties that under Section 35(a) of the Lanham Act, a
court “in exceptional cases may award reasonable attorney fees to the prevailing
party.” 15 U.S.C. § 1117(a). The Court reviews these submissions to ensure
that the attorney’s fees hours are not “excessive, redundant, or otherwise
unnecessary.” Hensley v. Eckerhart, 461 U.S. 424, 433-34 (1983).
36
Additionally, in its post-trial submission, plaintiff noted that it would also
seek interest under 15 U.S.C. 1117(a). Pl. Post-Trial Memorandum at 1 n.2, ECF
No. 470.
Similarly, “Section 1117(a) does not provide for prejudgment
interest,” but “such an award is within the discretion of the trial Court” and
is “reserved for ‘exceptional’ cases.” Am. Honda, 918 F.2d at 1064. It is far
from clear that prejudgment interest is warranted in this case.
48
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 49 of 52
Appendix A: Sales
SKU
Wine
PEJU PROVINCE WINERY WINES
13450
2013 Liana North Coast Orange Muscat
14450
2014 Liana North Coast Orange Muscat
15450PP
2015 Liana Late Harvest
LIANA ESTATES WINES (Retail and Wholesale)
14231
2014 Pinot Noir NV
Gross Sales
Discount
Net Sales
Source
$208,665
$133,326
No revenues awarded
$6,140
$5,849
$202,525
$127,477
PX-16/DX-25; DX-33
PX-16/DX-25; DX-33
$193,712
$29,962
$163,750
$59,750
$14,119
$45,631
No revenues awarded
No revenues awarded
No revenues awarded
$92,372
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
$19,838
$72,534
$0
$0
$0
14691
2014 Vintner's Red
14801L
14811L
14281L
15071L
2014 Sparking RO
2014 Sparkling Bru
2014 Blanc de Blanc
2015 Chardonnay N
15101L
2015 Vintners Pink
15101LSE
2015 Vintners
$6,358
$1,217
$5,141
15101LTR
2015 Vintners
$33,291
$5,573
$27,718
15651
2015 Orange Muscat Dry
$0
$0
$0
15651SE
2015 Orange Muscat
$29,036
$3,189
$25,847
15651TR
2015 Orange Muscat
$34,238
$3,731
$30,507
15671
2015 Viognier Mendocino
$0
$0
$0
15671SE
2015 Viognier - S
$14,816
$2,162
$12,654
15671TR
2015 Viognier - T
$28,103
$3,810
$24,293
15681
2015 Vintners White Blend
$0
$0
$0
15681SE
2015 Vintners W
$62,804
$14,397
$48,407
15681TR
2015 Vintners W
$82,013
$18,133
$63,880
49
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 50 of 52
Appendix A: Sales
SKU
15691
Wine
2015 Vintners Red
Gross Sales
$25,538
Discount
$3,527
Net Sales
$22,011
16101L
2016 Vintners Pink NV
$0
$0
$0
16331L
2016 Rose of Pinto
$29,216
$3,481
$25,735
16431L
2016 Riesling No
$14,720
$1,682
$13,038
16651L
2016 Orange Muscat
$204
$0
$204
16671L
2016 Viognier Mendocino
$0
$0
$0
2014 Pinot Noir NV
$43,320
$0
$43,320
2014 Vintners Red Blend
$78,630
$0
$78,630
$1,280
$0
$1,280
$528
$0
$528
2015 Vintners White TR Only
$24,372
$0
$24,372
2015 Vintners White -SH/DE
$3,408
$202
$3,206
$1,486
$16
$576
$2,676
$485
$552
$1,230
$1,170
$341,881
$857,709
$8,191
$0
$0
$0
$0
$0
$0
$0
$0
$11,984
$125,023
$0
$1,486
$16
$576
$2,676
$485
$552
$1,230
$1,170
$330,002
$732,686
$8,191
2015 Chardonnay NV Peju
2015 Vintners Pink - TR
BY THE GLASS POURS LIANA ESTATES
BTG-CHL
BTG Chardonnay
BTG-MISCL BTG - Misc Liana
BTG-OM
BTG - Orange Muscat
BTG-PN
BTG - Pinot Noir
BTG-VP
BTG - Vintners Pink
BTG-VI
BTG - Viognier
BTG-VR
BTG - Vintners Red
BTG-VW
BTG - Vintner's White
Total Peju Branded Infringing Wine Revenue
Total Liana Estates Branded Infringing Wine Revenue
Total Liana Estates Branded Infringing Wine By-theGlass Revenue
Total Revenues
$1,070,879
50
Source
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-10/DX-18; PX-12/DX-20; PX14/DX-22; DX-29
PX-11/DX-10; PX-13/DX-21; PX15/DX-24; DX-31
PX-11/DX-10; PX-13/DX-21; PX15/DX-24; DX-31
PX-11/DX-10; PX-13/DX-21; PX15/DX-24; DX-31
PX-11/DX-10; PX-13/DX-21; PX15/DX-24; DX-31
PX-11/DX-10; PX-13/DX-21; PX15/DX-24; DX-31
PX-11/DX-10; PX-13/DX-21; PX15/DX-24; DX-31
DX-18; DX-20; DX-22; DX-29
DX-18; DX-20; DX-22; DX-29
DX-18; DX-20; DX-22; DX-29
DX-18; DX-20; DX-22; DX-29
DX-18; DX-20; DX-22; DX-29
DX-18; DX-20; DX-22; DX-29
DX-18; DX-20; DX-22; DX-29
DX-18; DX-20; DX-22; DX-29
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 51 of 52
Appendix B: Costs
Peju Branded Infringing Wine
Cost of Goods Sold
SKU
2014
2015
2016
2017
2018
Total
Source
13450
$3,167
$8,591
$1,298
$9
$0
$13,065
DX-11; DX-34
14450
$0
$41
$3,536
$3,559
$1,393
$8,529
DX-11; DX-34
Total
$3,167
$8,632
$4,834
$3,568
$1,393
$21,594
Liana Estates Branded Infringing Wines
Cost of Goods Sold (Bottles and By-the-Glass Sales)
Cost of Wine in P&L [a]
All Wine Revenues in P&L [b]
Infringing Wine Net Revenues [c]
Percentage of Wine Sales from Infringing Wines
([d]=[c]/[b])
2016
$259,367
2017
$174,435
2018
$85,416
Total
$519,218
$252,254*
$564,203
$357,784
$1,174,241
$221,769
$319,533
$199,576
$740,878
87.91%
56.63%
55.78%
Source
DX-13; DX-14; DX-30
DX-03, Ex. 5.14; DX-13; DX-14;
DX-30
Total Costs for Infringing Wines ([d] x [a])
$228,022
$98,790
$47,646
$374,459
*The Court found credible the testimony of Mr. Duski that there was an incorrect debit from retail wine sales for $49,760. DX-03, Ex. 5.14; Trial Tr. at
604:10-605-14. We include the same adjustment in our calculation.
Excise Taxes
Excise Taxes [g]
Allocation of Excise Taxes to Bottle Sales [g] x [d]
2016
$6,853
2017
$2,558
2018
$2,041
Total
$11,452
$6,025
$1,449
$1,138
$8,612
51
Source
DX-13; DX-14; DX-30
Case 1:17-cv-00873-NRB Document 472 Filed 09/22/23 Page 52 of 52
Appendix C: Profits
Revenues
Cost of Goods Sold
Excise Taxes
Operating Costs
Profits
Peju-Branded
Wines
$330,002
$21,594
$0
$0
$308,408
52
Liana-Branded
Wines (including
By-the-Glass Sales)
$740,877
$374,459
$8,612
$0
$357,806
Total
$1,070,879
$396,053
$8,612
$0
$666,214
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