Select Comfort Corporation v. Baxter

Background

Select Comfort Corporation and Select Comfort SC Corporation, referred to together in the opinion as Sleep Number, sued John Baxter, Dires, LLC doing business as Personal Touch Beds and Personal Comfort Beds, Scott Stenzel, and Craig Miller. The claims remaining for trial included trademark infringement, unfair competition, and false advertising under the federal Lanham Act, as well as false advertising under Minnesota law. The claims involved the defendants’ advertising and statements to consumers, including use of the phrase “NUMBER BED.”

The case had previously gone to trial, where Sleep Number sought money damages and a jury trial. The jury rejected several claims and found that Sleep Number did not have trademark rights in “NUMBER BED.” The U.S. Court of Appeals for the Eighth Circuit later vacated some portions of the judgment and sent others back for further proceedings. After remand, the district court denied the parties’ summary-judgment motions, leaving the infringement and other claims for another trial. The opinion states that no counterclaims or fair-use affirmative defense remained.

Motion for a Bench Trial

Sleep Number represented that it would seek only equitable relief at the new trial. Its requested remedies included injunctive relief, increased recovery, attorney fees, litigation costs, and disgorgement of the defendants’ profits. Disgorgement means requiring a defendant to give up profits allegedly obtained through wrongful conduct.

Sleep Number’s damages expert presented two theories: profits allegedly gained by the defendants from increased website traffic and advertising costs the defendants allegedly avoided by benefiting from Sleep Number’s marketing. Sleep Number said it would seek only the defendants’ alleged gains. The expert calculated profits connected to sales of more than 4,000 beds at $1,964,809 and calculated the alleged saved advertising costs at more than $13 million.

The defendants argued that the saved-advertising-cost component was not disgorgement of profits. They characterized it as a measure of damages sustained by Sleep Number and argued that a jury trial was therefore required. They also argued that even a disgorgement claim could be legal rather than equitable in nature. The defendants stated that they had not waived their jury-trial right. They alternatively requested a retrial with an advisory jury.

Court’s Analysis

The Seventh Amendment generally preserves a jury-trial right for legal claims, while claims seeking only equitable relief are tried by the court. Courts evaluate the historical nature of the claim and the type of remedy sought, with the remedy receiving greater weight. The court applied this framework to the remedies Sleep Number said it would pursue.

The court concluded that Sleep Number’s proposed recovery did not strictly seek disgorgement of the defendants’ profits. In particular, the court found that the alleged saved advertising costs represented costs Sleep Number claimed the defendants had avoided. The court considered that calculation more accurately characterized as Sleep Number’s actual damages, or at least a substitute measure for those damages, rather than the defendants’ profits.

Because that remedy was legal in nature, the court concluded that a jury trial was appropriate. The court therefore denied Sleep Number’s motion to strike the jury trial and denied its motion for a bench trial. The order did not decide the ultimate merits of the remaining trademark, unfair-competition, or false-advertising claims.