Lexington Furniture Industries, Inc. v. The Lexington Company, AB

Background

Lexington Furniture Industries, Inc. ("LFI"), doing business as Lexington Home Brands, sued The Lexington Company, AB ("LCC"), doing business as The Lexington Clothing Company. LFI asserted claims under the federal trademark statute, state unfair-competition and trademark law, and a settlement agreement between the parties. After a jury trial from May 26 through June 2, 2022, the jury found for LFI on all claims and found that LCC’s trademark infringement was willful.

The jury awarded LFI $1,641,963 in profits disgorged under the federal trademark claim, $925,000 in punitive damages on the state-law claim, and one dollar in nominal damages for breach of contract.

LCC’s Motion for Judgment as a Matter of Law

LCC asked the court to set aside the verdict and dismiss LFI’s claims. A judgment as a matter of law is appropriate only when the evidence could not reasonably support the jury’s verdict. LCC argued that LFI had not proved a likelihood of consumer confusion and that the equitable defense of laches barred LFI’s claims.

The court denied the motion. Viewing the evidence in LFI’s favor, the court concluded that a reasonable jury could find likely consumer confusion. The evidence included the parties’ use of “Lexington,” the relationship between their furniture and home-goods products, testimony about actual customer confusion, and evidence that LCC knew about LFI’s marks before entering the U.S. market. Although the parties’ consumers were described as sophisticated and their products as similar in quality and price, the court held that no single factor controlled the overall confusion analysis.

The court also held that laches did not bar LFI’s claims. Laches is an equitable defense based on unreasonable delay that prejudices the opposing party. The jury’s finding of willful infringement independently foreclosed laches as a defense to injunctive relief. The court also concluded that LCC had not proved the defense on the facts: LFI sent cease-and-desist letters in 2013 and 2014, and LCC identified no evidence that LFI knew or should have known of infringement before December 20, 2013. The court therefore denied LCC’s motion for judgment as a matter of law.

LCC’s Motion to Alter or Amend the Judgment

LCC separately moved under Rule 59(e) to alter or amend the judgment. Such a motion is limited and generally requires an intervening change in controlling law, newly available evidence, or a clear error or manifest injustice. LCC argued that the jury’s profits award was only advisory, that the jury should have deducted a share of LCC’s costs and expenses, and that punitive damages were unavailable because LFI had not obtained a separate award of actual damages under New York law.

The court denied the motion. LCC had participated in the jury trial without objecting to having the jury decide the profits award. It had submitted proposed jury instructions and a verdict sheet addressing profits, and it did not object when the court submitted the issue to the jury. The court held that LCC’s silence amounted to consent to a binding jury verdict on disgorgement.

The court also held that the profits award was supported by the evidence and the instructions. LCC had the burden of proving expenses that should be deducted from gross revenue and had to show a sufficient connection between each claimed overhead expense and the infringing goods. LCC’s evidence combined costs for clothing, home goods, and other business operations, and did not show that the expenses were attributable specifically to the infringing products. The court rejected LCC’s proposed method of deducting 45 percent of its expenses because infringing products represented 45 percent of its U.S. gross revenue.

The court further concluded that the jury had evidence of infringement before 2017, including testimony about LCC’s U.S. stores, home-textile sales, social-media marketing, and the 2013 and 2014 cease-and-desist letters. It therefore found no clear error or manifest injustice in awarding profits for that period.

Finally, the court held that punitive damages were permissible on LFI’s New York unfair-competition claim. The parties’ claims were treated as having the same relevant elements, and LCC had agreed during trial that establishing the federal trademark claim also established the state unfair-competition and common-law trademark claims. The court concluded that the profits award under the federal trademark statute could provide evidence of actual harm supporting punitive damages, and the trial record also included testimony of actual consumer confusion that harmed LFI’s reputation. The court denied LCC’s motion to alter or amend the judgment.

Permanent Injunction

LFI sought a permanent injunction under the federal trademark statute. To obtain one, a plaintiff must show irreparable injury, inadequate monetary remedies, a balance of hardships favoring equitable relief, and consistency with the public interest.

The court granted LFI’s motion for a permanent injunction. It found likely irreparable harm because continued confusion could cause LFI to lose control over its reputation and goodwill, harms that money damages could not easily quantify or remedy. The balance of hardships favored LFI because LCC had breached the settlement agreement and had willfully infringed LFI’s marks. The public also had an interest in avoiding confusion, deception, and mistake.

The injunction applies to LCC’s use of Lexington-formative marks, including the flag logo and “Lexington Clothing Company,” despite earlier settlement-agreement permissions for certain uses. It is limited to home goods—defined to include home furnishings, textiles, and décor—and to products or advertising sold in or directed to the United States. The court found those geographic and product limits appropriately tailored and concluded that the injunction would not unnecessarily burden LCC’s lawful activities.

Disposition

Judge P. Kevin Castel denied LCC’s motion to alter or amend the judgment and denied LCC’s motion for judgment as a matter of law. The court granted LFI’s motion for a permanent injunction. The court did not decide LFI’s request for attorneys’ fees and costs in this opinion; it directed LFI to update that application within 21 days and allowed LCC to respond seven days later.