United States District Court, D. South Carolina, Greenville Division
OPINION AND ORDER
MARY G. LEWIS, District Judge.
This matter is before the Court on Defendant Monster Cable Products, Inc., Monster, LLC and West Coast Customs, Inc.'s (collectively "Monster Cable") Motion for Attorney's Fees (ECF No. 383.) Monster Cable seeks its reasonable attorney's fees and costs in the amount of $2, 323, 259.20 for its success on Plaintiff Monster Daddy's breach of contract and Lanham Act claims as well as Monster Cable's breach of contract and Lanham Act counterclaims.
Having considered these filings and the arguments set forth by counsel, as well as the entire record in this case, this Court grants Monster Cable's Motion for Attorney's Fees (ECF No. 383) in part as set forth below.
FACTUAL AND PROCEDURAL BACKGROUND
Because the Court has recited the factual background underlying this litigation on several prior occasions, it will not do so again, except with respect to the pending Motions and to highlight a few relevant facts. Monster Daddy brought its initial action against Monster Cable on May 7, 2010 ("complaint"). (ECF No. 1.) Monster Daddy amended its complaint on November 28, 2011 ("amended complaint") to assert seventeen counts generally based on breach of contract, trademark infringement, unfair competition, and unfair trade practices. (ECF No.193.) Monster Cable answered the amended complaint on March 9, 2012, and filed a counterclaim directed to claims of breach of contract and declaratory relief, as well as claims arising under the Federal Trademark Act of 1946, as amended, 15 U.S.C. § 1051, et seq. (the "Lanham Act") and common law trademark right claims. (ECF No. 207 at 71.)
Monster Daddy is the owner of the MONSTER and MONSTER ENGINEERING trademarks associated with various industrial, commercial, and household cleaners, waxes, and adhesives. (ECF No. 193, 50-53.) Around 2000, Monster Cable began producing MONSTER SCREENCLEAN, an electronics screen cleaning product. (ECF No. 195-1 at 3.) Monster Daddy and Monster Cable have been engaged in litigation for several years. In 2007, the parties resolved a previous action, Monster Daddy LLC v. Monster Cable Products, Inc., CA No. 6:06-293-HMH, by entering into a Settlement Agreement ("Settlement Agreement"). (ECF No. 195-4.) In that Settlement Agreement, Monster Cable agreed to recognize Monster Daddy's rights to the MONSTER trademark in connection with various types of products, including waxes and cleaners, along with other goods. (ECF No. 195-4 at 3-4.) Also granted to Monster Daddy was the right to extend its trademark into the natural zone of expansion for its various goods and services. (ECF No. 195-4 at 3-4.) In return, Monster Daddy expressly relinquished any claim it had to the MONSTER mark in connection with cleaners for consumer electronics and electronic accessories. (ECF No. 195-4 at 4.) On April, 23, 2013, this Court granted in part and denied in part Monster Cable's Motion for Contempt of Court and Sanctions against Monster Daddy (ECF No. 240) brought pursuant to Federal Rule of Civil Procedure 37 and allowed Monster Cable to reconvene a Rule 30(b)(6) deposition and awarded reasonable attorney's fees and costs associated with reconvening the deposition and filing a motion as a discovery sanction stemming from Monster Daddy's previous conduct in this case in failing to comply with court orders. (ECF No. 262.) In a follow up order, this Court ordered Monster Daddy to pay Monster Cable reasonable attorney's fees in the amount of $50, 618.40 plus costs in the amount of $5, 946.98. (ECF No. 428.)
Monster Cable moved for summary judgment in this matter on June 11, 2012. (ECF No. 218.) On July 2, 2013, this Court issued an opinion and order granting, upon reconsideration, summary judgment in favor of Monster Cable on Monster Daddy's breach of contract claims as well as Lanham Act and related claims concerning Monster Cable's Screen Clean products. (ECF Nos. 256 & 305.) On August 26-29, 2013, and September 16, 2013, this Court held a bench trial on the remaining claims, Monster Daddy's Declaratory Judgment claims, Monster Daddy's Lanham Act and related claims concerning Monster Cable's West Coast Customs products, and Monster Cable's counterclaims, and heard closing arguments from the parties. During the trial, Monster Cable brought a motion for default judgment against Monster Daddy upon the discovery of information previously sought in discovery concerning Monster Daddy's suppliers. (ECF No. 345.) Monster Cable contended that the Court's previous sanctions were insufficient to remedy the prejudice caused to Monster Cable as a result of Monster Daddy's conduct. This Court found the Motion for Default Judgment to be moot as a result of the Court's order resolving the parties' remaining claims on the merits in favor of Monster Cable. (ECF No. 377.) Monster Cable filed the instant post-trial Motion for Attorney's fees on October 14, 2013 seeking $2, 323, 259.20 in attorney's fees and costs in connection with defending, prosecuting and ultimately prevailing on the claims and counterclaims at issue in this case. (ECF No. 383.) Monster Cable also filed a Bill of Costs on October 14, 2013. (ECF No. 384.) Monster Daddy filed a response in opposition to the Motion for Attorney's Fees on January 6, 2014. (ECF Nos. 409-413.) On January 21, 2014, Monster Cable filed a reply in further support of its Motion for Attorney's fees (ECF No. 421) and a Notice of Supplemental Authority on April 30, 2014. (ECF No. 432.)
In the instant post-trial motion, Monster Cable seeks its reasonable attorney's fees and costs as a "prevailing party" under the parties' Settlement Agreement and under the Lanham Act's provision for exceptional cases. (ECF No. 383-1 at 3-4.) Monster Cable contends that its success in this case entitles it to a full recovery because the claims in this case were either breach of contract or Lanham Act claims or closely related, such that a full award is appropriate. (ECF No. 383-1 at 5.) Monster Cable acknowledges this Court's discretion in determining a proper and appropriate award in such a case.
Monster Daddy argues in response that Monster Cable's motion should be denied in its entirety, or in the alternative, that Monster Cable's award of attorney's fees and costs be significantly reduced. (ECF No. 409 at 1-2.) Monster Daddy maintains that it acted and pursued this litigation in good faith an in accordance with its beliefs as to its rights under the Settlement Agreement and pursuant to applicable law. (ECF No. 409 at 9.) Monster Daddy further contends that Monster Cable is improperly attempting to use this Court's prior discovery sanctions order as evidence of bad faith relevant to the instant matter. (ECF No. 409 at 9.) Monster Daddy also contends that Monster Cable has not proven that its fee request is reasonable. (ECF No. 409 at 10.) Before determining whether the requested fees are reasonable, the Court must first evaluate whether Monster Cable is entitled to fees and costs under both the Settlement Agreement and the Lanham Act.
1. Breach of Contract Claims
As an initial matter, this Court must determine whether attorney's fees are permitted under the Settlement Agreement signed by the parties in 2007. The Settlement Agreement provides for the recovery of reasonable attorney's fees and costs by the prevailing party "in the event of any breach of [the] Agreement." ( See Settlement Agreement at § 12.11, ECF No. 421-7 at 8). Monster Cable claims that it is the prevailing party as to Monster Daddy's breach of contract claims and Monster Cable's breach of contract counterclaims by virtue of this Court's previous rulings and the language of the Settlement Agreement, which contemplates that a defendant alleging a breach of the Settlement Agreement can also be a prevailing party. (ECF No. 383-1 at 7-8.) Monster Daddy does not seem to specifically dispute Monster Cable's entitlement to attorney's fees pursuant to the Settlement Agreement, and instead focuses its arguments on whether this case is exceptional under the Lanham Act and the overall reasonableness of the fee request. (ECF No. 409 at 30.)
The Settlement Agreement is governed by South Carolina law. ( See Settlement Agreement at ¶12.8 ("This Agreement shall be governed by and construed in accordance with the laws of the United States and the State of South Carolina...."), ECF No. 421-7 at 7.) Accordingly, the relevant question for the Court is whether, under South Carolina law, Monster Cable would be considered the prevailing party in this multi-count complaint on those claims which concern a breach of the governing Settlement Agreement. The Supreme Court of South Carolina has previously found that a prevailing party is "one who successfully prosecutes an action or successfully defends against it, prevailing on the main issue, even though not to the extent of the original contention [and] is the one in whose favor the decision or verdict is rendered and judgment entered.'" Sloan v. Friends of Hunley, Inc., 393 S.C. 152, 157, 711 S.E.2d 895, 897 (2011) (citing Heath v. Cnty. of Aiken, 302 S.C. 178, 182-83, 394 S.E.2d 709, 711 (1990)). "A court det ermines the prevailing party by evaluating the degree of success obtained." Heath, 302 S.C. at 183, 394 S.E.2d at 711.
Under the "American Rule, " the parties to a lawsuit generally bear the responsibility of paying their own attorney's fees. See Layman v. State, 376 S.C. 434, 451, 658 S.E.2d 320, 329 (2008)(citing Pennsylvania v. Del. Valley Citizens' Council for Clean Air, 478 U.S. 546, 561 (1986)). There are some exceptions to this rule, including the award of attorney's fees when authorized by contract or statute. Baron Data Sys., Inc. v. Loter, 297 S.C. 382, 383, 377 S.E.2d 296, 297 (1989). Thus, the Court must consider the claims individually to identify either a contractual or statutory basis for an award of attorney's fees.
Here, the court agrees that Monster Cable is the prevailing party on the breach of contract claims. This Court ultimately granted Monster Cable summary judgment on Monster Daddy's breach of contract claims based on a lack of evidentiary proof as to damages attributable to any alleged breach of the Settlement Agreement. (ECF No. 305 at 9-14.) Monster Cable also prevailed at trial on its breach of contract counterclaim and this Court found that Monster Daddy materially breached the 2007 Settlement Agreement by failing to abandon the Old Monster Registration and by failing to use MONSTER in the manner proscribed and contemplated by the Settlement Agreement. (ECF No. 377 at 28-29.) Accordingly, Monster Cable has satisfied the threshold requirement of establishing that it is a prevailing party under the Settlement Agreement, a significant issue in this case. The Court must determine what fee is a reasonable amount to award for success on these claims.
2. Lanham Act Claims
Monster Cable also claims entitlement to attorney's fees under Section 35 of the Lanham Act. (ECF No. 383-1 at 9.) The Lanham Act allows the court to award attorney's fees to the prevailing party in exceptional cases. 15 U.S.C. § 1117(a). "[T]he purpose of the attorneys' fees amendment to the Lanham Act was to provide for an award in exceptional cases in which equity called for an award in the sound discretion of the district judge." Tamko Roofing Prods., Inc. v. Ideal Roofing Co., Ltd., 282 F.3d 23, 31-32 (1st Cir. 2002). Monster Cable argues that this is an "exceptional case" as contemplated by the statute, maintains that it has "proven that Monster Daddy's conduct, as a whole, was highly prejudicial and done in bad faith, " and as evidence points to Monster Daddy's litigation tactics, purported meritless claims, failure to comply with the terms of the Settlement Agreement, and willful and deliberate conduct which it deems to have been in bad faith. (ECF No. 383-1 at 11.) Monster Daddy argues that this case is not exceptional under the Lanham Act and characterizes the action as a simple and non-malicious disagreement over the interpretation of a settlement contract. (ECF No. 409 at 5.)
An award of attorney's fees to the prevailing party under 15 U.S.C. § 1117(a) is equally available to prevailing plaintiffs and defendants. The Scotch Whisky Ass'n v. Majestic Distilling Co., Inc., 958 F.2d 594, 599 (4th Cir.1992) (establishing that, unlike a prevai ling plaintiff, a prevailing defendant is required to show "[s]omething less than bad faith'" to prove an "exceptional case"). The statute does not define what constitutes an exceptional case, but the Fourth Circuit has defined such a ca se as one in which the parties' conduct was "malicious, fraudulent, willful or deliberate in nature." People for Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th Cir. 2001) (internal citations omitted); Tools USA & Equip. Co. v. Champ Frame Straightening Equip., Inc., 885 F.Supp. 141, 144 (M.D. N.C. 1994), aff'd, 87 F.3d 654 (4th Cir. 1996)("An exceptional case is one where the infringement is deliberate, willful, fraudulent, or malicious.")(internal citations omitted). The Fourth Circuit historically employed a dual standard of proof upon prevailing plaintiffs and defendants- a prevailing plaintiff seeking attorney fees must demonstrate that the defendant acted in bad faith. However, when an alleged infringer is the prevailing party, he can qualify for an award of attorney fees upon a showing of something less than bad faith by the plaintiff. See Retail Services, Inc. v. Freebies Publishing, 364 F.3d 535, 550 (4th Cir. 2004). "Some pertinent considerations for judging a plaintiff's (or counterclaim plaintiff's) conduct when the defendant prevails include economic coercion, groundless arguments, and failure to cite controlling law. Thus, the focus tends to be on the plaintiff's litigation conduct or pre-litigation assertion of rights." Id. at 550-51. "The question, however, is not whether snippets of the record or isolated arguments clearly lack merit." Id. at 551. In sum, the court must "determine, in light of the entire case, whether [the losing party's] claims and assertions were so lacking in merit that the action as a whole was exceptional.'" Id. Monster Cable has alerted this Court to a recent and relevant Supreme Court case which states that the determination of whether a case is "exceptional" in these instances is a case-by-case exercise of the district court's discretion in consideration of the totality of the circumstances, and subject to a preponderance of the evidence standard. Octane Fitness, LLC v. Icon Health & Fitness, Inc., ___ S.Ct. ___ (2014), 2014 WL 1672251, at *5 (Apr. 29, 2014). (Rejecting the Federal Circuit's view as to whether a case is "exceptional" so as to justify an award of attorney's fees in patent litigation as overly restrictive.)
Upon consideration and even applying the more flexible standard set forth in Octane Fitness, the Court concludes that the case at bar is not an exceptional case warranting the imposition of attorney's fees and costs, meaning that it is not a "standout" from others with respect to the substantive strength (or lack thereof) of Monster Daddy's litigating position after considering both the governing law and facts of the case; or with respect to the unreasonableness of the manner in which this case was litigated. It follows that the Court would also not find this case to be "exceptional" under a higher "bad faith" or "something less than bad faith" standard to warrant the imposition of attorney's fees. The Court has always been cognizant of the complexity and high stakes involved in this case. Many of the issues were hotly contested and of great concern to both sides. This case has been actively litigated for several years and resulted in a substantial amount of motion practice. The Court previously denied Monster Cable's motion to dismiss and motion for summary judgment (ECF Nos. 226 and 251) and ultimately granted in part Monster Cable's motion for reconsideration of this Court's order denying Monster Cable's Motion for Summary Judgment. (ECF No. 305.) In that order, this Court granted summary judgment in favor of Monster Cable on Monster Daddy's breach of contract, South Carolina Unfair Trade Practices Act and ScreenClean claims but left certain issues to be resolved at trial, particularly Monster Daddy's West Coast Customs Lanham Act claims and Monster Cable's counterclaims. Although Monster Daddy ultimately lost on the claims, it is not appropriate to look back in hindsight and conclude that Monster Daddy lacked sufficient basis for asserting and defending the claims simply because it lost at trial. See Vanwyk Textile Systems, B.V. v. Zimmer Machinery America, Inc., 994 F.Supp. 350, 382 (W.D. N.C. 1997)("A party should not be penalized for defending or prosecuting a lawsuit when the party has a good faith belief in its position.")
Of course, as Monster Cable points out, this Court has already made some rulings as to Monster Daddy's conduct which have some bearing on the instant analysis. In an order dated April 23, 2013, this Court issued limited sanctions based on Monster Daddy's failure to produce documents responsive to Monster Cable's discovery requests and comply with the Court's directives. (ECF No. 262 at 7.) In a subsequent order, this Court awarded Monster Cable's reasonable attorney's fees and costs associated with reconvening a Rule 30(b)(6) deposition and for the reasonable attorney's fees and costs associated with filing a discovery motion. (ECF No. 428.) Although the Court has made a finding as to the bad faith nature of Monster Daddy's conduct relative to discovery, the Court declines to use that order and those proceedings as further proof of any bad faith or unreasonable conduct on the part of Monster Daddy as to the case in its entirety and for the purpose of awarding fees under the Lanham Act. To the extent Monster Cable contends that an award of attorney's fees under the Lanham Act is appropriate based on the discovery-related conduct of Monster Daddy during the course of this litigation, ...