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

Background

Lexington Furniture Industries, Inc. doing business as Lexington Home Brands (LFI) prevailed at trial against The Lexington Company, AB doing business as The Lexington Clothing Company (LCC). The jury found for LFI on its Lanham Act trademark claim and state-law unfair-competition claim, found the Lanham Act violation willful, and awarded LFI $1.00 in nominal damages for breach of the parties’ Settlement Agreement, $1,641,963 in disgorged profits on the Lanham Act claim, and $925,000 in punitive damages on the unfair-competition claim.

The court later granted LFI’s motion for a permanent injunction. The separate Permanent Injunction entered on December 22, 2022, prohibited LCC and other covered persons and entities from using “LEXINGTON,” or a confusingly similar mark, with home goods sold in or directed to the United States. It also required covered websites and social-media accounts to block or restrict access by people in the United States, including U.S.-based followers where direct blocking was not possible.

LFI then sought attorneys’ fees under the Lanham Act’s provision allowing fees in an “exceptional” case. Separately, LFI alleged that LCC violated the Permanent Injunction and asked the court to hold LCC in civil contempt.

Civil Contempt

For civil contempt, the court applied three requirements: the order must be clear and unambiguous; noncompliance must be shown by clear and convincing evidence; and the alleged contemnor must not have made a diligent, reasonable attempt to comply. The court found that the Permanent Injunction clearly described the prohibited conduct and required affirmative compliance steps.

The court found clear and convincing evidence that LCC violated the injunction after the 21-day compliance period. The evidence showed that LCC or covered third-party sellers continued offering Lexington-branded home goods to U.S. purchasers, used the mark in U.S.-directed online and email advertising, failed to block U.S. access to a covered website, and failed to block or restrict U.S.-based access to covered social-media accounts and followers. The court also found that LCC did not prove a diligent and reasonable effort to comply.

The court held LCC in contempt of court for violating the Permanent Injunction. LCC was ordered to achieve full compliance within 10 days of the March 30, 2023 order. Beginning after that 10-day period, LCC would owe a coercive penalty of $500 per day until it fully complied. The court reserved the right to increase the penalty if further violations occurred after 30 days. LFI did not prove out-of-pocket damages, lost sales, or lost profits for past noncompliance, so the court awarded none. The court did award LFI reasonable attorneys’ fees and costs incurred in pursuing the contempt remedy, and allowed LFI to submit an application for that award within 21 days.

Exceptional-Case Fee Request

The court explained that an “exceptional” Lanham Act case is one that stands out because of the strength of a party’s legal or factual position or because of the unreasonable way the case was litigated. The court considers the total circumstances, including frivolousness, motivation, objective unreasonableness, and the need for compensation or deterrence.

The court concluded that LCC’s litigation conduct was not exceptional. Although the case was hard-fought, the lawyers were professional and did not violate recognized litigation norms. The court also found that LCC’s legal and factual positions were not exceptionally weak or unreasonable. LCC had a legitimate right to challenge the verdict, and its post-trial arguments were reasonably focused even though the court rejected them.

The court further considered the jury’s disgorgement and punitive-damages awards, which reduced the need for additional compensation or deterrence. It concluded that the case was not exceptional under the Lanham Act and denied LFI’s motion for attorneys’ fees under that provision.

Taxable Costs

The court separately denied LFI’s application for taxable costs without prejudice to renewal within 30 days after the Second Circuit issues its mandate in the pending appeal. The court directed that any renewed request be made through a Notice of Taxation of Costs filed on the court’s electronic filing system and directed to the Clerk of Court as required by the local rule.

Disposition

The court held LCC in contempt for violating the Permanent Injunction; ordered full compliance within 10 days and a $500-per-day coercive penalty thereafter; awarded LFI reasonable attorneys’ fees and costs for pursuing the contempt remedy; denied LFI’s Lanham Act exceptional-case fee motion; and denied LFI’s taxable-costs application without prejudice to renewal on the stated schedule.