Variety Stores, Inc. v. Wal-Mart Stores, Inc.

Filing 353

**VACATED pursuant to DE #369 ** ORDER granting in part and denying in part #340 Motion for Attorney Fees. Signed by US District Judge Terrence W. Boyle on 7/6/2017. (Stouch, L.) Modified docket text on 5/17/2018 (Stouch, L.).

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:14-CV-217-BO
VARIETY STORES, INC.,
Plaintiff,

v.
WAL-MART STORES, INC.,
Defendant.

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ORDER

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This cause comes before the Court on plaintiffs motion for attorneys' fees, non-taxable
expenses, treble damages, and pre-judgment interest. [DE 340]. The matter has been fully briefed
and is ripe for disposition. For the reasons discussed below, plaintiffs motion is granted in part
and denied in part.
BACKGROUND
The Court incorporates by reference as if fully set forth herein the factual and procedun:ll
background included in its order granting partial summary judgment. [DE 149].
On December 8, 2015, the Court granted Variety Stores, Inc.'s (hereinafter "Variety")
partial summary judgment in its favor on its claim for trademark infringement and unfair
competition under federal law and trademark infringement and unfair and deceptive practices

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under state law. [DE 149]. In its order, the Court found that Variety owns a protectable interest in
the BACKYARD marks and that Wal-Mart Stores, Inc.'s (hereinafter Walmart) competing use
created a likelihood of confusion. Id.
Subsequently, Variety moved for a bench trial focused on an accounting and
disgorgement of profits which is an equitable remedy not necessitating a jury trial. [DE 157].
The Court granted this motion, [DE 211], and an evidentiary bench trial on these issues was held

on October 11and12, 2016. The Court, in a written order issued on November 22, 2016, found
that Walmart's sales of infringing products during the relevant time period in the states where
Variety and Walmart both operated totaled $395,316,314.71, that Walmart proved appropriate
costs to be deducted in the amount of $362,794,643.31, and therefore found that profit in the
amount of$32,521,671.40 could be attributed to sales of the infringing mark. [DE 316]. After
considering several equitable factors the Court determined, in its discretion, that the profit figure
derived above was a just award to plaintiff in these circumstances and ordered that Walmart
disgorge the amount to Variety. Id.
On December 21, 2016, Variety filed a motion requesting that the Court set a date for a
jury trial on the issue of damages, arguing that the Lanham Act allows it to recover damages in
addition to an equitable disgorgement of profits and that it reserved its right to such a jury trial
on damages. [DE 318]. The Court denied this motion and entered final judgment. [DE 334].
Variety filed a notice of appeal that same day, [DE 336], followed by the instant motion seeking
attorneys' fees and costs under Rule 54(d)(2) of the Federal Rules of Civil Procedure and to alter
or amend the Court's judgment under Rule 59(e) to add awards for treble damages, pre-judgment
interest, and to fix an accounting error. [DE 340].
DISCUSSION
Variety first moved for an award of attorneys' fees and costs. Under the Lanham Act,
"[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 15
U.S.C. § 1117 (a). As explained by the Fourth Circuit,
a district court may find a case "exceptional" and therefore award attorneys fees
to the prevailing party under § 1117 (a) when it determines, in light of the totality
of the circumstances, that (1) "there is an unusual discrepancy in the merits of the
positions taken by the parties," Fair Wind Sailing, 764 F.3d at 315, based on the
non-prevailing party's position as either frivolous or objectively unreasonable, see
Octane Fitness, 134 S.Ct. at 1756 n. 6; (2) the non-prevailing party "has litigated

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the case in an 'unreasonable manner,"' Fair Wind Sailing, 764 F.3d at 315
(quoting Octane Fitness, 134 S.Ct. at 1756); or (3) there is otherwise "the need in
particular circumstances to advance considerations of compensation and
deterrence," Octane Fitness, 134 S.Ct. at 1756 n. 6 (quoting Fogerty, 510 U.S. at
534 n. 19, 114 S.Ct. 1023) (internal quotation marks omitted).

Georgia-Pacific Consumer Products LP v. van Drehle Corp., 781 F.3d 710, 721 (4th Cir. 2015),
as amended (Apr. 15, 2015). As the Supreme Court has explained in interpreting the term in a
similar context, "an 'exceptional' case is simply one that stands out from others with respect to
the substantive strength of the party's litigating position (considering both the governing law and
the facts of the case) or the unreasonable manner in which the case was litigated." Octane

Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014).
In assessing the totality of the circumstances, see Octane Fitness, 134 S. Ct. at 1756, the
Court finds that this is an exceptional case warranting the award of attorneys' fees. First, there
has been an unusual discrepancy in the positions taken by the parties in this matter. As
previously noted at summary judgment, Walmart decided to use the BACKYARD mark despite
being twice warned by its own attorneys not to do so and despite being aware of Variety's
trademark registration. [DE 149 at 2-3]. This fact alone marks this case as unusual and exhibits
the discrepancy between the parties' positions in this matter. Despite this holding at summary
judgment, Walmart continued to dispute the willfulness of its infringement in all following
stages oflitigation. 1 Walmart also continually advanced remarkable contentions throughout this
litigation, such as the- argument that the BACKYARD mark was worth "zero" despite the Court's
prior holding that that Walmart's competing use of the BACKYARD mark created a likelihood

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As previously noted by the Court, "Walmart presented evidence at trial purporting to prove that
its infringement was not willful or was based on entirely innocuous reasons .... However, this is
plainly contradicted by the Court's earlier finding as a matter of fact that Walmart adopted the
mark intentionally after its legal team made its brand team aware of Variety's mark and twice
warned the brand team not to use the Backyard mark." [DE 316 at 4].
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of confusion and that the mark was commercially strong. This case also presents a particular
need for compensation and deterrence. As described by the Court in summary judgment,
Having engaged in the nine-point analysis and found it favors plaintiff, the Court
now considers the circumstances of this case at a more global level, for
examination of the larger picture is especially compelling. Before the Court is a
case in which a larger company with deeper pockets for litigation selected a
product name with the same dominant word as a smaller company by which to
sell the same and similar items as that smaller company. The larger company
knew of the smaller company's use-and trademark-when it decided to use the
name, but the larger company used it anyway. The items were then sold in the
same types of stores located in the same geographic areas and frequented by the
same types of customers. It is difficult to imagine how these circumstances lead to
anything but a likelihood of confusion.
[DE 149 at 14]. For these reasons, the Court finds this to be an exceptional case meriting the
award of attorneys' fees.
The question then becomes what fees are reasonable to award. This Court has the
discretion to determine the amount of a fee award. Mercer v. Duke Univ., 30 F. Supp. 2d 454,
466 (M.D.N.C. 2004) (citing Hensley v, Eckerhart, 461 U.S. 424, 437 (1983), abrogated on other
grounds by Tex. States Teachers Assoc. v. Garland Indep. Sch. Dist., 489 U.S 782 (1989)). To
calculate an award of attorneys' fees, the court "must first determine a lodestar figure by
multiplying the number of reasonable hours expended times a reasonable rate." Robinson v.
Equifax Info Servs., LLC, 560 F.3d 235, 243 (4th Cir. 2009). The party requesting fees bears the

burden of establishing the reasonableness of the requested rate and "must produce satisfactorily
specific evidence of the prevailing market rates in the relevant community for the type of work
for which he seeks an award." Id at 244. Other facts may lead the court "to adjust the fee upward
or downward." Hensley, 461 U.S. at 434.
Plaintiff submitted a declaration which detailed billing information to support its request
for attorneys' fees and costs in the amounts of $1,554,028.45 and $136,593.68, respectively. [DE

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341 at 14]. The Court has considered all the facts, the circumstances of this litigation, as well as
the declarations and affidavits submitted by plaintiff. [DE 341-1, 341-2, 341-3, 341-4, and 3415]. The Court finds the rates proposed by plaintiff to be reasonable for this region and under the
standards laid out by the Fourth Circuit. See Robinson, 560 F.3d at 243; Grissom v. Mills Corp.,
549 F.3d 313, 321 (4th Cir. 2008).
A fee applicant also must establish the reasonableness of the hours requested. See

Hensley, 461 U.S. at 437. Plaintiffs request fees for a total of 5,275.92 hours and, after reviewing
the affidavits and billing statements submitted by plaintiffs, the Court finds that this is a
reasonable number of hours. Plaintiff has demonstrated with sufficient particularity that the
hours requested were properly billable and appropriately performed by plaintiffs attorneys.
Therefore, Variety's motion to award attorneys' fees and costs is granted and the Court
finds that an award of fees and non-taxable costs totaling $1,554,028.45 and $136,593.68,
respectively, to be reasonable given the extent of litigation in this matter and the circumstances
of the case. In crafting this remedy, the Court has carefully considered what amount will
compensate plaintiff for its losses without being punitive and what is reasonable under the
applicable statutes and standards.
Variety has also requested that the judgment be amended to treble damages and award
pre-judgment interest. Prior to filing the instant motion, Variety appealed this Court's order and
judgment, raising questions as to the extent of the remedies available to it under state and federal
law in these circumstances. As Walmart has noted, the filing of an appeal divests a district court
of jurisdiction over all matters that are the subject of that appeal. See Griggs v. Provident

Consumer Disc. Co., 459 U.S. 56, 58 (1982) ("The filing of a notice of appeal is an event of
jurisdictional significance-it confers jurisdiction on the court of appeals and divests the district

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court of its control over those aspects of the case involved in the appeal."). There is a limited
exception to this general principle which is encompassed in Rule 59 of the Federal Rules of Civil
Procedure. Under that Rule, a motion to alter or amend judgment can be made within 28 days of
entry of judgment, and the Fourth Circuit has recognized three reasons for which a court can
grant such a motion: (1) to accommodate an intervening change in controlling law; (2) to account
for new evidence not available previously; or (3) to correct a clear error of law or prevent
manifest injustice. Zinkand v. Brown, 478 F.3d 634, 637 (4th Cir. 2007). Although Variety did
not identify the specific basis for its motion under Rule 59, because it did not present any new
evidence or identify a change in law, Variety is ostensibly arguing that judgment should be
amended to correct a clear error of law or prevent manifest injustice.
The Court has previously ruled tha! Variety prevailed under its state and federal law
causes of action, [DE 149], and the Court consequently entered an order disgorging the entirety
ofWalmart's profits that the Court found, under its equitable discretion, to be compensable to
Variety. [DE 316]. Further, the Court held that, in these circumstances, the disgorgement award
was the entirety of the remedy available to Variety under state and federal law. 2 The questions

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The Court described its reasoning in its previous order denying Variety's motion to set a trial
date: "In considering the above principles, the Court also notes that the award which was
previously granted, which the Court considered and found to be just, necessarily includes any
amount of a reasonable royalty that a jury might subsequently find. This is because the award
was the entirety of the compensable profits derived by Walmart from its infringing activity, and
such profit necessarily includes any amount of royalty that would have been paid from its sales.
Consequently, any actual damages in the form of a reasonable royalty that a jury might award to
Variety would need to be deducted from Walmart's profits to avoid an impermissible double
recovery. See, e.g., Playboy Enters., Inc. v. Dumas, 831 F. Supp. 295, 320 (S.D.N.Y.), opinion
modified on reargument, 840 F. Supp. 256 (S.D.N.Y. 1993), aff'd in part, rev'd in part on other
grounds, 53 F.3d 549 (2d Cir. 1995) ("[A]ny license or royalty fee would be deducted from the
profits to prevent double recovery."). Consequently, there is no need to hold ajury trial on the
issue of damages because such'an award is already encompassed by the award of disgorged
profits .... Because the state law claims require proof of the same essential elements as Variety's
claims under federal law, to the extent Variety seeks a remedy under its state law claims, such an
award would be duplicative of Variety's award under the Lanham Act. A party may not recover
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Variety raises concerning the remedies available to it under state law have already been appealed
and are under consideration in the Fourth Circuit, [DE 336, 344], and this Court has therefore
been divested of jurisdiction over these matters. Additionally, for the reasons discussed in the
Court's prior orders, the Court finds that there is no clear error of law or manifest injustice to
correct such that judgment should be altered or amended under Rule 59. Therefore, Variety's
request for to alter or amend its judgment is denied.
Finally, Variety requests that the Court correct the disgorgement award by increasing it
by $390,000 due to a computation error that had occurred in the materials presented to the Court
at trial. Such a request is properly understood as a request to correct a mistake under Rule 60 of
the Federal Rules of Civil Procedure. However, that rule states that, "after an appeal has been
docketed in the appellate court and while it is pending, ... a mistake may be corrected only with
the appellate court's leave." Fed. R. Civ. P. 60(a). As that is the situation here, this Court is
unable to make the requested correction without leave from the Fourth Circuit and Variety's
motion is denied.

twice for one injury, even ifthe party asserts multiple, consistent theories of recovery. See Gen.
Tel. Co. ofthe Northwest, Inc. v. EEOC, 446 U.S. 318, 333 (1980) ("It ... goes without saying
that the courts can and should preclude double recovery by an individual."). Any additional
award under state law would therefore be an impermissible double recovery, and there is no need
to bring such claims before a jury." [DE 334 at 8].
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CONCLUSION
For the foregoing reasons, plaintiffs motion [DE 340] is GRANTED IN PART and
DENIED IN PART. Defendant is ORDERED TO PAY $136,593.68 in costs and $1,554,028.45
in attorneys' fees to plaintiff.

SO ORDERED, this

_i_ day of July, 2017.

TERRENCE W. BOYLE
UNITED STATES DISTRICT J

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