INNOVATIVE METAL CRAFT, LLC v. WHALEY et al
Filing
112
MEMORANDUM OPINION re 107 MOTION for Attorney Fees filed by JON WHALEY, THE BARNDOOR HARDWARE STORE, LLC. Signed by Judge Susan Paradise Baxter on 12/30/2020. (esa)
Case 1:17-cv-00138-SPB Document 112 Filed 12/30/20 Page 1 of 8
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
INNOVATIVE METAL CRAFT,
LLC,
)
)
)
Plaintiff,
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v.
)
)
JON WHALEY and THE BARNDOOR )
HARDWARE STORE, LLC,
)
)
Defendants.
)
Case No. 1:17-cv-138
MEMORANDUM OPINION
Pending before the Court in the above-captioned matter is a motion by the Defendants,
Jon Whaley (“Whaley”) and The Barndoor Hardware Store, LLC (“BDHS”), for attorney’s fees
and costs, following this Court’s entry of partial summary judgment in their favor and against
Plaintiff, Innovative Metal Craft (“IMC”). ECF No. 107. For the reasons that follow, the
Defendants’ motion will be denied.
I.
Factual and Procedural History
The instant litigation arose out of a failed business relationship between Timothy
Haskins, the owner of IMC, and Whaley, the record owner of BDHS. Whaley was employed by
IMC from in or around August 2014 to some point in late 2016 or early 2017. During this time,
Whaley’s primary responsibilities were to run IMC’s office and assist with sales and marketing.
In the spring of 2015, Whaley suggested to Haskins that IMC utilize the scrap materials
from its spiral staircase manufacturing process to manufacture barn door hardware. In August of
2015, Whaley, while still employed by IMC, registered the domain name
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“www.thebarndoorhardwarestore.com.” Whaley later formed BDHS as a limited liability
company on January 29, 2016 and, allegedly unbeknownst to Haskins, named himself (Whaley)
as the owner and sole member of BDHS.
During the time that Whaley remained in IMC’s employ, BDHS and IMC had an ongoing
business relationship, the exact nature of which is disputed by the parties. Throughout most or all
of 2016, IMC manufactured and supplied barn door hardware for BDHS to sell, and BDHS
utilized IMC’s employees to perform certain services. In return, Whaley made multiple
payments to IMC, and sometimes to Haskins directly; however, no set prices were established,
nor were invoices generated, for the parts and labor that IMC provided. Whaley retained
BDHS’s profits and maintained that he had informed Haskins that he (Whaley) was forming a
separate business entity in order to market and sell barn door hardware on his own behalf.
Haskins, on the other hand, claimed that he and Whaley had discussed only the possibility of
IMC forming a new business division with the goal of insulating the barn door hardware
business from IMC’s judgment creditors and tax lien holders. Accordingly, Haskins believed
that the payments received from BDHS were business distributions made to himself in his
capacity as owner of the company.
In May 2017, IMC initiated this litigation with the filing of a five-count complaint
against BDHS and Whaley. The complaint set forth a claim under the Lanham Act, 15 U.S.C.
§1125(a), at Count I and related claims for injunctive relief (Count II), unfair competition (Count
III), breach of fiduciary duty (Count IV), and conversion (Count V).
After a period of discovery, the parties filed cross-motions for partial summary judgment.
IMC moved for summary judgment relative to the conversion claim at Count V. Whaley and
BDHS requested an entry of summary judgment on the Lanham Act claim at Count I and
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dismissal of the remaining claims for lack of jurisdiction. Alternatively, Defendants sought an
entry of summary judgment relative to Counts I through IV and dismissal of the conversion
claim at Count V.
On April 29, 2020, the undersigned entered a Memorandum Opinion and Order granting
summary judgment in favor of Whaley and BDHS relative to IMC’s Lanham Act claim. ECF
Nos. 105, 106. The Court declined to exercise supplemental jurisdiction over all remaining state
law claims and dismissed them without prejudice so that the parties could litigate those claims in
state court. Id.
In disposing of Count I, the Court acknowledged that IMC was predicating its Lanham
Act claim upon an alleged infringement of its “trade dress.” The Court found this theory
“untenable as a matter of law” for multiple reasons. ECF No. 105 at 10. First, IMC had not
specifically asserted its trade dress theory in the complaint; instead, IMC articulated this theory
for the first time in its summary judgment brief. Thus, the Court opined that this tactic could
arguably be viewed as an improper attempt by IMC to retroactively amend its pleading. Next,
accepting the claim at face value, the Court found that many of the items that formed the basis of
IMC’s claim – such as the business’s trade name, the web address
www.thebarndoorhardwarestore.com, the email domain name spiralstairsofamerica.com, and
certain unspecified “channels of commerce” – were not items that constituted protectable “trade
dress.” ECF No. 105 at 10-11. Further, assuming that certain distinctive, ornamental features on
IMC’s website, social media pages, or third-party vendor sites might constitute protectable trade
dress, the Court found that IMC “failed to articulate or produce evidence of the specific design
aspects it is seeking to protect.” Id. at 11. And even when it construed IMC’s evidence of
alleged infringement in the most favorable light, the Court found that, at most,
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Whaley and BDHS may have implicitly or explicitly appropriated aspects of IMC’s
business for use on the BDHS website and social media pages; however, such
evidence is insufficient to establish that IMC’s own website, social media pages,
third-party vendor sites, or other “channels of commerce” have a specific
“composite look” that is subject to protection under the Lanham Act.
Id. at 12. In addition, recognizing that protectable trade dress includes only ornamental (as
opposed to functional) features, the Court observed that IMC had failed to delineate those
portions of its website and third-party vendor sites that are non-functional, and thus potentially
protectable trade dress. Id. at 12-13. Finally, the Court found that IMC had offered “nothing in
the way of evidence to suggest that the alleged trade dress elements are so inherently distinctive
that they would cause consumers to identify IMC as the source of the hardware products being
sold.” Id. at 16 (emphasis in the original). Finding no genuine issue of material fact relative to
IMC’s Lanham Act claim, the Court granted Defendants’ motion for partial summary judgment
relative to Count I. Id.
Following the Court’s ruling, Defendants filed the instant motion for attorney’s fees and
costs. ECF No. 107. The matter has been fully briefed and is now ripe for resolution.
II.
Discussion
Section 35 of the Lanham Act gives courts the discretion to award attorneys' fees in
“exceptional cases.” 15 U.S.C. § 1117(a) (“The court in exceptional cases may award reasonable
attorney fees to the prevailing party.”). The Supreme Court has held that an “exceptional” case
is “one that stands out from others with respect to the substantive strength of a 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.,
572 U.S. 545, 554 (2014); see also Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303, 314-15
(3d Cir. 2014) (following Octane Fitness and stating “cases are ‘exceptional’ under the Lanham
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Act ‘when (a) there is an unusual discrepancy in the merits of the positions taken by the parties
[,] or (b) the losing party has litigated the case in an ‘unreasonable manner.’”).
There is “no precise rule or formula” for making this determination. Octane Fitness, 134
S. Ct. at 1756. “Whether litigation positions or litigation tactics are ‘exceptional’ enough to
merit attorneys' fees must be determined by district courts ‘in the case-by-case exercise of their
discretion, considering the totality of the circumstances.’” Fair Wind, 764 F.3d at 315 (quoting
Octane Fitness, 134 S. Ct. at 1756). Some considerations that may help to illuminate this inquiry
include “frivolousness, motivation, objective unreasonableness (both in the factual and legal
components of the case) and the need in particular circumstances to advance considerations of
compensation and deterrence.” Octane Fitness, 134 S. Ct. at 1756 n.6 (citation omitted).
After due consideration of the parties’ respective positions, the Court is not persuaded
that the instant case is so “exceptional” as to warrant fee shifting under Section 35 of the Lanham
Act. In weighing considerations such as whether IMC’s claim was frivolous or objectively
unreasonable, the Court is cognizant that certain aspects of trade dress infringement law are
somewhat elusive, subjective, or inherently incapable of precise definition. As the Court
previously observed, “trade dress” is defined in this circuit as “the overall look of a product or
business.” ECF No. 105 at 7 (quoting Fair Wind Sailing, 764 F.3d at 309). “Trade dress is
generally classified into the categories of either ‘product design’ (also known as ‘product
configuration’) or ‘product packaging,’ and occasionally a ‘tertium quid,’ a third, indeterminate
catchall.” Id. at 8 (citation and internal quotation marks omitted). And, while some courts have
extended the concept of trade dress to include websites that portray a certain “look and feel,” this
concept is itself inherently subjective. See id. (citing authority).
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Judged against these somewhat nebulous standards, this Court ultimately found IMC’s
Lanham Act claim deficient in several respects. At the same time, however, this case did not
involve a typical run-of-the-mill Lanham Act dispute between two entirely independent
businesses, each with separately generated and competing “trade dress.” Here, IMC’s claim
arose in the context of a spin-off entity that IMC essentially claimed was stolen out from under it
by a former employee. Further complicating matters was the parties’ apparent failure to reduce
any aspect of their business arrangement to writing, resulting in a muddled and underdeveloped
factual record. The atypical context of this case did not, per se, render the Lanham Act
inapplicable, but it rendered this case distinguishable from other prototypical Lanham Act cases,
making the legal analysis less straight-forward. That the issues were not completely “cut and
dry” is borne out by the fact that Defendants invested more than 180 hours in legal work
defending the Lanham Act claim. At some point defense counsel also perceived a need to
consult an attorney who specializes in these issues. Though Count I was ultimately found to be
untenable, Defendants apparently did not consider the claim so facially implausible as to seek
dismissal at the Rule 12(b)(6) stage. In this Court’s estimation, the disparities in the merits of
the parties’ respective positions is not so unusual, and IMC’s claim was not so objectively
unreasonable or frivolous, as to warrant an award of attorneys’ fees in this case.
The Court also finds that IMC did not litigate its Lanham Act claim in an unreasonable
manner, despite the Court’s observation that IMC had arguably attempted to amend its pleading
through assertions made in its summary judgment brief. While the precise articulation of IMC’s
theory did evolve over time, the Court does not perceive that this was done in bad faith, nor does
it believe that Defendants were unfairly prejudiced as a result. IMC clearly pled a Section 43(a)
violation in Count I of the complaint, which would encompass a claim for alleged infringement
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of its trade dress. Moreover, the complaint was specific and detailed, such that Defendants were
on notice from the beginning of the case as to the factual underpinnings of IMC’s grievance. As
noted, Defendants did not challenge IMC’s pleading, either by way of seeking dismissal or by
way of seeking a more definite statement of the Section 43(a) claim. During the course of
discovery, Defendants had ample opportunity to flesh out IMC’s Lanham Act theory, beyond
merely inquiring about protectable trademarks. To the extent that discovery problems arose in
this case, these were largely the product of actions by Defendants’ or their original counsel.
Given all of these circumstances, it is perhaps not surprising that the first specific articulation of
IMC’s “trade dress infringement” theory arose at the summary judgment stage. In fact, if IMC
had been able to properly support such a claim, it is possible that the Court might have granted
IMC leave to amend its complaint, given the liberal amendment policies of Rule 15. For all of
these reasons, the Court does not perceive that IMC litigated Count I in bad faith or in an
objectively unreasonable manner.
Nor does the Court perceive a need in the particular circumstances of this case to award
fees as a means of advancing considerations of compensation and deterrence. As noted, this case
arose out of atypical circumstances in which the parties’ complicated business arrangement was
apparently never completely fleshed out or reduced to writing. As a result, it is not surprising
that major disputes arose and the relationship broke down. When the facts are viewed in the light
most favorable to IMC, it appears that IMC has a colorable grievance, and it remains to be seen
whether IMC will prevail on any of its alternative claims. For the reasons discussed, however, it
does not appear to the Court that IMC litigated its Lanham Act claim in bad faith or in an
unreasonable manner. Therefore, the Court perceives no basis for awarding attorney’s fees or
costs as a means of compensating Defendants or deterring future misconduct.
Case 1:17-cv-00138-SPB Document 112 Filed 12/30/20 Page 8 of 8
III.
Conclusion
Based upon the foregoing reasons, the Defendants’ motion for attorneys’ fees and costs
will be denied. An appropriate order follows.
___________________________
Susan Paradise Baxter
United States District Judge
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