Court Opinion

ID: 149036
Source: CourtListenerOpinion
Date Created: 2010-06-21 20:10:14+00
Date Added: 2024-06-11T17:24:09.443263
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 09-2085

EMPLOYERS COUNCIL ON FLEXIBLE COMPENSATION,

                Plaintiff – Appellee,

           v.

KENNETH FELTMAN; ANTHONY W.     HAWKS;     EMPLOYERS   COUNCIL   ON
FLEXIBLE COMPENSATION, LTD.,

                Defendants – Appellants.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. James C. Cacheris, Senior
District Judge. (1:08-cv-00371-JCC-TRJ)

Argued:   May 12, 2010                       Decided:    June 21, 2010

Before WILKINSON and KING, Circuit Judges, and HAMILTON, Senior
Circuit Judge.

Affirmed by unpublished per curiam opinion.

ARGUED: Edward A. Pennington, HANIFY & KING, Washington, D.C.,
for Appellants.     Bernard Joseph DiMuro, DIMUROGINSBERG, PC,
Alexandria, Virginia, for Appellee. ON BRIEF: Anthony W. Hawks,
HAWKS LAW OFFICE, Bethany Beach, Delaware, for Appellants.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

      In    2008,   the    Employers     Council   on   Flexible        Compensation

(“ECFC”) instituted this civil action in the Eastern District of

Virginia     against      Kenneth   Feltman,    Anthony        W.    Hawks,   and   the

Employers Council on Flexible Compensation, Ltd. (collectively,

the       “defendants”),      alleging        trademark         infringement        and

cybersquatting.        Shortly thereafter, the parties entered into a

Permanent Injunction Order (the “Consent Order”), agreeing that

certain of ECFC’s marks were protected under the Lanham Act and

the   Anticybersquatting        Consumer      Protection       Act    (the    “ACPA”).

Deeming     the   Consent    Order   a    concession      of    liability      on   the

trademark infringement and cybersquatting claims, the district

court     awarded   ECFC     attorney    fees   under     the       Lanham    Act   and

statutory damages pursuant to the ACPA.                 See Flexible Benefits

Council v. Feltman, No. 1:08-cv-371 (E.D. Va. May 14, 2009) (the

“Damages Opinion”). 1          The defendants have appealed, primarily

contending they did not admit liability in the Consent Order

and, in any event, that attorney fees and statutory damages were

not warranted.      As explained below, we affirm.

      1
       The Damages Opinion is found at J.A. 1328–58. (Citations
herein to “J.A. ___” refer to the Joint Appendix filed by the
parties in this appeal.)

                                          2
                                             I.

      ECFC — a nonprofit lobbying organization dedicated to the

maintenance and expansion of private employee benefit programs —

was incorporated in 1981 in the District of Columbia under the

name “Employers Council on Flexible Compensation.”                          Between 1981

and   2008,   ECFC     continuously          and    exclusively         used   “Employers

Council on Flexible Compensation” as its legal and trade name.

The organization also used the acronym “ecfc,” as well as an

“ecfc” logo, to further designate its products and services.

For     example,     in     1999,     ECFC         registered      the     domain     name

“ecfc.org,” at which it maintained a website promoting flexible

benefit compensation programs.

      In 1996, ECFC encountered severe financial problems, which

threatened the organization with bankruptcy.                           Defendant Kenneth

Feltman, who was then ECFC’s executive director, was asked to

create a separate management company that could assume ECFC’s

day-to-day      operations           and         minimize        the      organization’s

indebtedness.         Accordingly,         Feltman     incorporated        Radnor,    Inc.

(“Radnor”), a political consulting firm specializing in, inter

alia, management services.                In 1997, 2003, and 2005, ECFC and

Radnor    entered      into       separate        management      service      agreements

(“MSAs”),     under       which     Radnor       agreed     to    hire     ECFC’s    staff

(including    Feltman)        and    to    exercise       management       services    for

ECFC.    Thus, although Feltman was technically no longer an ECFC

                                             3
employee after the 1997 MSA, he continued to play a significant

role in its management.

       In 2007, ECFC’s relationship with Radnor soured, prompting

ECFC   to    terminate       the    2005   MSA.         In    November    2007,     ECFC

initiated        an    arbitration     proceeding        against    Radnor     in    the

District     of       Columbia,    alleging      that    Radnor    and    Feltman    had

pilfered millions of dollars owed to ECFC.                        Radnor thereafter

filed a counterclaim in the arbitration proceeding, asserting

that ECFC had wrongfully terminated the 2005 MSA.

       In January 2008, defendant Anthony W. Hawks — a lawyer

representing Radnor and Feltman in the arbitration proceeding —

discovered that ECFC’s corporate charter had been revoked in

September 1998 because ECFC had failed to file certain reports

with the D.C. Department of Consumer and Regulatory Affairs (the

“DCRA”).     Rather than notifying ECFC, Feltman and Hawks instead

attempted to determine the legal implications of the revocation.

Based on limited legal research, Hawks concluded that, pursuant

to D.C. law, ECFC was dissolved as a matter of law and had

forfeited any rights it had in the marks “ecfc” and “Employers

Council     on    Flexible       Compensation.”         Accordingly,      in   February

2008, Feltman and Hawks formed a for-profit corporation in the

District     of       Columbia     under   the    name       “Employers   Council     on

Flexible Compensation, Ltd.” (“ECFC Ltd.”), with each serving as

part owner thereof.              Feltman and Hawks reserved with the DCRA

                                            4
the     acronym     “ecfc,”       the    trade      name       “Employers         Council      on

Flexible Compensation,” and twenty-one variations of that name.

Moreover,     in    March    2008,      Hawks      applied      to    the    United      States

Patent    and     Trademark       Office     to    register       the      mark    “Employers

Council    on     Flexible    Compensation,”             as    well   as    a     design      mark

identical to ECFC’s “ecfc” logo.                         Finally, Feltman and Hawks

obtained      the   domain    name      “ecfc.com”         —    which      was    similar       to

ECFC’s domain name, “ecfc.org” — and maintained a website that

was nearly identical to that of ECFC.

       In March 2008, ECFC first learned of the revocation of its

corporate charter and promptly filed for reinstatement.                                 Because

Feltman and Hawks had reserved “Employers Council on Flexible

Compensation” as the trade name of ECFC Ltd., ECFC could not be

reinstated under its former name and instead chose “Flexible

Benefits Council” (though it continued to operate its website at

the    domain     name    “ecfc.org”).            Soon    thereafter,        on     April      17,

2008,    ECFC     filed    this    lawsuit        against      the    defendants         in    the

Eastern District of Virginia, alleging, inter alia, trademark

infringement, in contravention of § 43 of the Lanham Act, 15

U.S.C. § 1125(a), and cybersquatting, in contravention of the

ACPA,    15     U.S.C.    § 1125(d).          By     its       complaint,        ECFC    sought

injunctive relief (1) prohibiting the defendants from using the

name     “Employers       Council       on    Flexible         Compensation”         and       any

variation       thereof,     as    well      as    the     acronym      “ecfc,”         and    (2)

                                              5
ordering      the    defendants            to   relinquish            the        “ecfc.com”      domain

name.      ECFC also sought reasonable attorney fees under § 35(a)

of   the    Lanham     Act,      which       authorizes           a    court       “in    exceptional

cases      [to]   award        reasonable        attorney         fees       to     the    prevailing

party.”       15 U.S.C. § 1117(a).                    Finally, pursuant to the ACPA,

ECFC     sought      up     to       $100,000         in    statutory             damages     on       its

cybersquatting claim.                 See id. § 1117(d) (authorizing recovery

of “an award of statutory damages in the amount of not less than

$1,000 and not more than $100,000 per domain name”).

        During various hearings conducted over the ensuing months,

ECFC and the defendants indicated to the district court that

they     were     intent        on    settling         the    lawsuit,             but    that        they

disagreed on damages.                 The defendants maintained that, because

they had reasonably believed that they could legally use the

name “Employers Council on Flexible Compensation” and the “ecfc”

logo, their conduct did not warrant awarding ECFC attorney fees

under      the    Lanham       Act    or     statutory        damages             under    the     ACPA.

Because the only issue in dispute was whether attorney fees and

statutory        damages       were    warranted,           the       parties       agreed       to    the

Consent      Order,       entered       by      the    court          on     October       22,     2008.

Therein,      the    defendants            agreed      “not       to       contest       further       the

distinctiveness           of     [ECFC’s]       marks”       or       its        “ownership      of     or

rights      in”     those      marks.           J.A.       974.            The    defendants          also

acknowledged that ECFC’s “marks are subject to the protections

                                                  6
of the Lanham Act.”         Id.      The Consent Order permanently enjoined

the defendants from using in any manner ECFC’s marks and any

names affiliated with the organization, thereby allowing ECFC to

re-register      itself     with     the   DCRA      under     the    name    “Employers

Council    on    Flexible      Compensation.”           Finally,       the   defendants

agreed to transfer the domain name “ecfc.com” to ECFC.

       Thereafter, the district court — by the Damages Opinion of

May 14, 2009 — granted ECFC’s request for attorney fees and

statutory damages.         Notably, the court predicated its ruling on

the    Consent    Order,    recognizing         “[a]t       the    outset    . . .    that

Defendants      have   admitted      liability        for    trademark      infringement

. . . and cybersquatting.”             Damages Opinion 6.              The court also

observed    that,      “[a]s    agreed     to    by    the     parties,      the   issues

remaining for the Court are [ECFC’s] requests for two of the

types of damages available under these statutes:                             attorney[]

fees . . . and statutory damages.”                     Id.        In other words, the

court deemed the Consent Order to be the defendants’ concession

of liability under the Lanham Act and the ACPA, obviating any

need to assess the merits of ECFC’s claims.

       Turning    to   ECFC’s       request     for    attorney       fees    under    the

Lanham Act, the district court found that the defendants had

willfully and deliberately copied ECFC’s logo and other items

from    ECFC’s    website      in    order      to    divert       ECFC’s    profits    to

themselves.       The court also found that Feltman and Hawks had

                                           7
intentionally reserved the name “Employers Council on Flexible

Compensation” in an effort to prevent ECFC from reinstating its

corporate charter under that name.                  The court thus determined

that the defendants had acted in bad faith and that the dispute

amounted      to   an    “exceptional      case,”    warranting          an    award   of

reasonable attorney fees to ECFC in an amount to be determined

following an evidentiary hearing.                See Damages Opinion 28. 2              As

to   ECFC’s    request     for    statutory      damages    under    the      ACPA,    the

court found that the defendants had deliberately registered a

domain name (“ecfc.com”) that was confusingly similar to ECFC’s

domain name (“ecfc.org”).               Accordingly, the court awarded ECFC

$20,000 in statutory damages.             See id. at 30.

      On    May    29,    2009,    the    defendants        filed    a     motion      for

reconsideration         pursuant    to    Federal    Rule    of     Civil      Procedure

59(e), contending that the district court’s award of attorney

fees and statutory damages was based on the clearly erroneous

factual finding that the defendants had, by the Consent Order,

admitted      liability    under    the    Lanham    Act     and    the       ACPA.    In

addition,     simultaneous       with    their    motion    for     reconsideration,

the defendants moved the court to amend the Consent Order to

clarify that they had not conceded liability on ECFC’s trademark

      2
       The district court ultimately awarded ECFC $292,500 in
attorney fees under the Lanham Act. The amount of the award is
not an issue in this appeal.

                                           8
and cybersquatting claims.            By its Memorandum Opinion of August

20,   2009,    the   court   denied       each   of    the   defendants’      motions,

finding that the Consent Order’s unambiguous terms, coupled with

the parties’ representations to the court before and after the

Consent Order was entered, demonstrated that the defendants had

conceded liability.          See Employers Council on Flexible Comp. v.

Feltman, No. 1:08-cv-371 (E.D. Va. August 20, 2009). 3                    In denying

both motions, the court emphasized that, “[w]hen both parties

(repeatedly) represent to the Court that they have resolved most

of the issues between them and only one issue remains, they are

necessarily     representing        that    they   have      resolved   all    of    the

issues but that one.”             Id. at 8.      Because the court could find

“no   reason    to    second-guess         the   parties’       representations       on

settlement matters,” it again concluded that the defendants had

conceded      liability      in     the     Consent      Order.         Id.    at     9.

Accordingly,     the    court       denied       the   defendants’      motion       for

reconsideration and their motion to amend the Consent Order.

      The defendants have filed a timely notice of appeal, and we

possess    jurisdiction      pursuant       to   15    U.S.C.    § 1121(a)     and    28

U.S.C. § 1291.

      3
       The district court’s August 20, 2009 Memorandum Opinion is
found at J.A. 1403–18.

                                           9
                                          II.

         We review for abuse of discretion a district court’s award

of attorney fees under the Lanham Act.                   See Retail Servs. Inc.

v. Freebies Publ’g, 364 F.3d 535, 550 (4th Cir. 2004).                           Any

factual findings underpinning such an award, however, including

the court’s determination of whether the case is “exceptional,”

are reviewed for clear error only.                 See Carolina Care Plan Inc.

v. McKenzie, 467 F.3d 383, 390 (4th Cir. 2006), abrogated on

other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105

(2008); see also Schlotzsky’s, Ltd. v. Sterling Purchasing &

Nat’l Distrib. Co., 520 F.3d 393, 402 (5th Cir. 2008) (“The

findings of the district court regarding the exceptional nature

of   a    case    are    reviewed   for    clear    error.”).      Similarly,    in

assessing a district court’s award of statutory damages within

the range prescribed by statute, we review factual findings for

clear     error    and   the   decision    to    award   damages   for   abuse   of

discretion.        See Lyons P’ship, L.P. v. Morris Costumes, Inc.,

243 F.3d 789, 799 (4th Cir. 2001).

                                          III.

         On appeal, the defendants raise several challenges to the

district court’s award of attorney fees and statutory damages.

The crux of the defendants’ appeal, however, is their contention

that the court rested its damages award on a clearly erroneous

                                           10
factual finding with respect to the Consent Order — namely, that

the defendants had therein conceded liability under the Lanham

Act   and   the    ACPA.      Accordingly,    we     must   first     assess   the

defendants’ contention that the court erred by not independently

determining       whether   they     were   liable     on    ECFC’s    trademark

infringement and cybersquatting claims.                We then turn to the

defendants’ assertion that the court erred in deeming the matter

an “exceptional case,” warranting an attorney fees award under

the Lanham Act.        Finally, we assess the defendants’ contention

that the court abused its discretion in determining that their

conduct warranted an award of statutory damages under the ACPA.

                                       A.

      The defendants’ primary contention on appeal is that the

district    court    abused    its    discretion     because    its    award   of

attorney fees and statutory damages was based on the erroneous

finding that they had admitted liability in the Consent Order.

Emphasizing the terms thereof, the defendants maintain that the

Consent Order enjoined them only from using ECFC’s marks in the

future and contained no explicit admission of liability with

respect to their past use of ECFC’s marks.                  They contend that,

before the court could properly assess whether the defendants’

conduct was willful — and warranted awarding attorney fees and

statutory damages — the court first had to determine whether

they were in fact liable under the Lanham Act and the ACPA.                    The

                                       11
defendants       conclude   that,     because   the    court    made   no   such

determination, its award of attorney fees and statutory damages

must be vacated.

       The defendants’ contention on their concession of liability

is     belied    by   the   record,     however,   which   is    replete    with

representations to the district court that the Consent Order

resolved all issues concerning the merits of the trademark and

cybersquatting claims.          For example, during a motions hearing on

October 15, 2008 — before the parties had agreed to the Consent

Order — ECFC informed the court that the parties had resolved

“98 percent” of the issues and that the only remaining issue was

ECFC’s request for attorney fees and statutory damages.                     J.A.

960.     Indeed, both parties confirmed to the court that there was

no longer any need for a jury trial, which had been scheduled

for early December 2008, and that the damages issue could be

resolved        following   a   short    evidentiary    hearing.        Shortly

thereafter, during an evidentiary hearing on the damages issue,

the court asked the parties whether there were any outstanding

issues other than ECFC’s request for attorney fees and statutory

damages, and all parties responded that there were none.

       In light of these unambiguous representations, the district

court did not clearly err in finding that, by the Consent Order,

the defendants had conceded liability under the Lanham Act and

the ACPA.        See In re Charlie Auto Sales, Inc., 336 F.3d 34, 37

                                        12
(1st   Cir.     2003)   (“A   court’s    interpretation         of   a    contract   or

consent order is reviewed for clear error . . . if the court

relies     on   extrinsic     evidence    such       as   the   parties’        intent.”

(citation omitted)).           At no point after entry of the Consent

Order did the defendants indicate to the court that the issue of

their liability on the trademark and cybersquatting claims was

outstanding and needed to be resolved.                    To the contrary, they

asserted that      those      issues    had   been    resolved       by   the    Consent

Order.     See, e.g., J.A. 1367 (defendants’ counsel explaining to

court that “the only thing left [after the Consent Order] was

the issue of willfulness” and that “[t]he only reason that was

an issue is because of [ECFC’s request for] attorney[] fees”).

Accordingly, the defendants cannot successfully claim that the

court erred in finding that, by agreeing to the Consent Order,

they had admitted liability.             Thus, the court did not abuse its

discretion in declining to further assess the merits of ECFC’s

trademark infringement and cybersquatting claims. 4

       4
       Because this record supports the district court’s finding
that the defendants conceded liability in the Consent Order, we
also reject their appellate contention that the court abused its
discretion in refusing to amend the Consent Order.     Similarly,
the defendants’ assertion — presented for the first time on
appeal — that they could not be held liable under the ACPA
because they were not the “registrants” of the “ecfc.com” domain
name, see 15 U.S.C. § 1125(d)(1)(D), is without merit.

                                         13
                                             B.

       The defendants next contend that, in awarding attorney fees

pursuant to § 35(a) of the Lanham Act, the district court erred

in finding this to be an “exceptional case.”                                 Section 35(a)

authorizes a district court, in “exceptional cases” involving

trademark infringement or cybersquatting, to “award reasonable

attorney fees to the prevailing party.”                          15 U.S.C. § 1117(a).

Although      the    statute    does       not     define       the   term    “exceptional

case,” we have recongized that an “exceptional case” is one in

which     “the      defendant’s          conduct      was    malicious,        fraudulent,

willful    or    deliberate         in    nature.”          People     for    the   Ethical

Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th Cir.

2001) (internal quotation marks omitted).                        Put differently, “for

a   prevailing      plaintiff       to    succeed     in    a    request     for    attorney

fees, she must show that the defendant acted in bad faith.”

Scotch Whisky Ass’n v. Majestic Distilling Co., Inc., 958 F.2d

594,    599     (4th   Cir.    1992).            If   the    court     deems       the   case

exceptional, it must then exercise its discretion to determine

whether attorney fees should be awarded.                        See Enzo Biochem, Inc.

v. Calgene, Inc., 188 F.3d 1362, 1370 (Fed. Cir. 1999).

       The defendants maintain that the district court erred in

deeming this case exceptional.                   More specifically, they contend

that,   when     Feltman      and    Hawks       reserved       “Employers     Council    on

Flexible Compensation” as their new business’s trade name, they

                                             14
in good faith believed that ECFC had abandoned any rights it had

in that name.             Because Hawks and Feltman reasonably believed

that they could legally use ECFC’s marks, the theory goes, the

court could not have made the requisite finding of bad faith.

       The    record,       however,      provides         ample     support      for     the

district court’s determination that Feltman and Hawks willfully

and deliberately infringed on ECFC’s marks and reserved the name

“Employers Council on Flexible Compensation” in order to prevent

ECFC   from    reinstating        itself      under    that    name.         Indeed,      the

defendants’        ill-will      toward       ECFC    is    highlighted        in       emails

exchanged between Hawks and Feltman, wherein they admit that

their goal in copying ECFC’s marks was to “cause[] consternation

in the ranks.”            J.A. 764.       Moreover, the record reveals that

Hawks and Feltman believed that ECFC had wrongly “stolen” the

company and its profits when it terminated the 2005 MSA, and

that the revocation of ECFC’s corporate charter presented “an

opportunity [for Feltman to] retrieve his business by competing

directly     against       ECFC.”       Id.    at    227.     There     is    also       ample

support      for    the    court’s      determination         that    Hawks       had    only

conducted minimal legal research before concluding that ECFC had

lost   any    rights       to   the    name    “Employers      Council       on     Flexible

Compensation” and the “ecfc” logo.                   Hawks himself testified that

he   spent    “no    more       than   one    to     two    hours”    researching         the

                                              15
trademark issues, despite not having encountered such a legal

issue in the past “ten to twenty” years.             Id. at 1075–76.

       In these circumstances, the district court did not clearly

err in finding that the defendants acted in bad faith and that

the matter was an “exceptional case” under § 35(a) of the Lanham

Act.     And, having so concluded, the court did not abuse its

discretion   in   determining   that      attorney    fees    were   warranted,

given the nature of the defendants’ conduct.                  Accordingly, we

reject the defendants’ contentions in this regard and affirm the

award of attorney fees.

                                     C.

       Finally,   the   defendants   contend   that     the    district   court

abused its discretion in concluding that their conduct warranted

an award of statutory damages under the ACPA.                    That statute

authorizes the owner of a protected mark to bring an action

against any person who “has a bad faith intent to profit from

that mark” and “registers, traffics in, or uses a domain name

that . . . is identical or confusingly similar to . . . that

mark.”    15 U.S.C. § 1125(d)(1)(A).         Upon proving a violation of

the ACPA, the owner of the protected mark may “recover, instead

of actual damages and profits, an award of statutory damages in

the amount of not less than $1,000 and not more than $100,000

per domain name, as the court considers just.”               Id. § 1117(d).

                                     16
        The    district      court       acted    well       within           its    discretion      in

awarding ECFC $20,000 in statutory damages under the foregoing

statutory       provisions.             The    court         carefully          weighed      several

aggravating and mitigating factors before concluding that the

defendants’       conduct        warranted       that        award.            For    example,      the

court acknowledged that the defendants had used the “ecfc.com”

domain    name       for    only   a     short    time           and    apparently         earned    no

profits therefrom.               Indeed, the court observed that there had

been    only     one    occasion        of    actual        confusion          between      the     two

domain        names.        Nevertheless,             the    court        identified         several

factors       that     supported       the    award         of    statutory          damages.        In

particular, the court emphasized that Feltman had exploited a

long     and     close      working       relationship                 with    ECFC;       that     the

defendants had acted surreptitiously in registering their domain

name, without first notifying ECFC of its corporate revocation;

and    that     Hawks      had   only     briefly       researched             whether      ECFC    had

abandoned its legal rights in the marks “ecfc” and “Employers

Council on Flexible Compensation.”                          In these circumstances, the

court    did     not    abuse      its    discretion             in     making       the   award     of

statutory damages.

                                               IV.

        Pursuant       to    the    foregoing,          we        reject        the    defendants’

contentions and affirm.

                                                                                            AFFIRMED

                                                 17