Case(s): Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc., 140 S. Ct. 1589 (2020)
Lucky Brand and Marcel both use the word “Lucky” as key parts of their trademarks for use on jeans and other apparel. Their simultaneous use of the Lucky mark (namely, Marcel’s use and trademark registration for the phrase “Get Lucky,” and Lucky Brand’s use of the registered trademark “Lucky Brand,” along with other marks with the word “Lucky”) prompted 20 years of litigation.
District Court Proceedings
The first round resulted in a 2003 settlement agreement in which Lucky Brand agreed to stop using the phrase “Get Lucky” and Marcel agreed to release any claims regarding Lucky Brand’s use of its own trademarks.
In the second round (“2005 Action”), Lucky Brand sued Marcel and its licensee for violating its trademarks. Marcel filed several counterclaims turning, as relevant here, on Lucky Brand’s alleged continued use of “Get Lucky,” but it did not claim that Lucky Brand’s use of its own marks alone infringed the “Get Lucky” mark. In a motion to dismiss the counterclaims and a corresponding answer, Lucky Brand argued that the counterclaims were barred by the settlement agreement, but it did not invoke that defense later in the proceedings. In the 2005 Action, the court permanently enjoined Lucky Brand from copying or imitating Marcel’s “Get Lucky” mark, and a jury found against Lucky Brand on Marcel’s remaining counterclaims.
In the third round (“2011 Action”), Marcel sued Lucky Brand for continuing to infringe the “Get Lucky” mark, but it did not reprise its 2005 allegation about Lucky Brand’s use of the “Get Lucky” phrase. After protracted litigation, Lucky Brand moved to dismiss, arguing (for the first time since early in the 2005 Action) that Marcel had released its claims in the settlement agreement. Marcel countered that Lucky Brand could not invoke the release defense because it could have pursued that defense in the 2005 Action but did not.
District Court Decision & Second Circuit Appeal
The District Court granted Lucky Brand’s motion to dismiss. The Second Circuit vacated and remanded, concluding that “defense preclusion” prohibited Lucky Brand from raising a defense (that had not been litigated) that it should have raised earlier.
Supreme Court Decision
In a decision dated May 14, 2020, SCOTUS held that because Marcel’s 2011 Action challenged different conduct – and raised different claims – than the 2005 Action, Marcel cannot preclude Lucky Brand from raising new defenses. Specifically, SCOTUS held …
(a) This case asks whether so-called “defense preclusion” is a valid application of res judicata: a term comprising the doctrine of issue preclusion, which precludes a party from relitigating an issue actually decided in a prior action and necessary to the judgment, and the doctrine of claim preclusion, which prevents parties from raising issues that could have been raised and decided in a prior action. Any preclusion of defenses must, at a minimum, satisfy the strictures of issue preclusion or claim preclusion. See, e.g., Davis v. Brown. Here, issue preclusion does not apply, so the causes of action must share a “common nucleus of operative fact[s]” for claim preclusion to apply.
(b) Because the two suits here involved different marks and different conduct occurring at different times, they did not share a “common nucleus of operative facts.” The 2005 claims depended on Lucky Brand’s alleged use of “Get Lucky.” But in the 2011 Action, Marcel alleged that the infringement was Lucky Brand’s use of its other marks containing the word “Lucky,” not any use of “Get Lucky” itself. The conduct in the 2011 Action also occurred after the conclusion of the 2005 Action. But claim preclusion generally “‘does not bar claims that are predicated on events that postdate the filing of the initial complaint,’ ” Whole Woman’s Health v. Hellerstedt, because events occurring after a plaintiff files suit often give rise to new “operative facts” creating a new claim to relief.
(c) Marcel claims that treatises and this Court’s cases support a version of “defense preclusion” that extends to the facts of this case. But none of those authorities describe scenarios applicable here, and they are unlikely to stand for anything more than that traditional claim or issue preclusion principles may bar defenses raised in a subsequent suit – principles that do not bar Lucky Brand’s release defense here.