E. Mishan & Sons, Inc. v. Novel Brands LLC

Background

E. Mishan & Sons, Inc., doing business as Emson, sued Novel Brands LLC under the Lanham Act, a federal trademark and unfair-competition law. The claims concerned false advertising, unfair competition, false designation of origin, false description of fact, and misrepresentation of fact. E. Mishan alleged that Novel Brands sold competing cookware with a copper-colored coating and used an “As Seen On TV” logo even though Novel Brands had not advertised those products on television.

Novel Brands did not file an answer. After a default certificate and a hearing, the parties entered a consent judgment on August 29, 2018. The judgment held Novel Brands liable for violating the Lanham Act, enjoined further false advertising and unfair competition, and awarded E. Mishan $15,000 in attorney’s fees and costs. The court referred the issue of additional damages to Magistrate Judge Sarah Netburn for an evidentiary proceeding to determine the amount owed.

Objections to the damages recommendation

Magistrate Judge Netburn recommended an award totaling $454,277.32: $387,409.08 in Novel Brands’ profits, $7,672.77 in costs, and $59,195.47 in attorney’s fees. Novel Brands objected to the calculation of its profits. It argued that if invoices, purchase orders, bills of lading, and packing slips were enough to establish its sales, similar evidence should have been accepted to establish all of its costs.

Judge Broderick rejected that argument. Under the Lanham Act, E. Mishan had to prove Novel Brands’ sales, while Novel Brands had to prove the costs or deductions it claimed. Novel Brands had admitted that its gross revenue from the three accused products was $434,406.79, so the sales amount was undisputed. The court therefore concluded that the magistrate judge did not need to rely on the sales documents to establish that amount.

The court also upheld the magistrate judge’s treatment of Novel Brands’ claimed costs. It found sufficient support for $1,750 in trademark-approval costs, $770 in artwork costs, half of a $13,472.31 infomercial expense, $7,324.60 in commissions, $11,288.52 in inbound freight, $6,536.59 in outbound freight, and $12,590.85 in storage and processing fees. The court concluded that Novel Brands had not adequately proved its claimed cost of goods because it relied on a summary spreadsheet and three litigation declarations. The court also noted that Novel Brands had not addressed E. Mishan’s allegation that some products had been sold to a company owned by a relative of E. Mishan’s CEO and later repurchased at a higher price, potentially inflating the claimed costs.

Ruling

Judge Broderick overruled Novel Brands’ objections and adopted Magistrate Judge Netburn’s Report and Recommendation in its entirety. He awarded E. Mishan $387,409.08 in Novel Brands’ profits, $7,672.77 in costs, and $59,195.47 in attorney’s fees, for a total of $454,277.32. He also denied as moot E. Mishan’s motion for a conference under Federal Rule of Civil Procedure 16(a), directed the Clerk to enter judgment and calculate statutory interest, and ordered the case closed.