Court Opinion

ID: 2995002
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:17:51.200461+00
Date Added: 2024-06-11T11:45:23.364071
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-2462

S INDUSTRIES, INC.,

Plaintiff-Appellant,

v.

CENTRA 2000, INCORPORATED and
AUTO-TROL TECHNOLOGY, INCORPORATED,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 96 C 3524--George W. Lindberg, Judge.

Argued February 27, 2001--Decided May 1, 2001

  Before COFFEY, RIPPLE, and EVANS, Circuit
Judges.

  EVANS, Circuit Judge. In 1996 S
Industries, Inc. filed suit alleging,
among other things, that Centra 2000, a
producer of data management software,
infringed its "Sentra" trademark in
violation of the Lanham Act. In a
comprehensive summary judgment order,
District Judge George W. Lindberg ruled
in favor of Centra 2000, finding that S
Industries did not hold a federal
registration for the "Sentra" mark for
use on computer hardware or software.
Both because S Industries’ claims were,
in the judge’s view, completely unfounded
and because its procedural maneuvering
multiplied the cost of defending against
the suit, Centra 2000 was awarded
attorneys fees in July 1998.

  Although Judge Lindberg ordered the
parties to confer on the fee issue and
submit a joint statement on the amount of
the award, S Industries refused to tango.
It failed to provide Centra 2000 with
specific objections to the fees
requested. Moreover, even though S
Industries was granted more time to file
a joint statement, it ignored the
deadline and a week later filed a motion
for leave to file the joint statement
instanter. Attached to this tardy motion
was a "joint statement" that was never
served on Centra 2000.

  Not only did S Industries contest the
attorney fee amounts, but a year after
the award was granted, S Industries filed
a motion to dismiss the award based on a
"prior settlement agreement" between the
parties. Judge Lindberg found that no
such agreement existed and denied the
motion to scratch the award. Centra 2000
then filed a motion seeking a final
determination of the fee award.
Originally, the hearing on this motion
was scheduled for August 5,1999. However,
S Industries’ attorney found this date
inconvenient and asked to appear by
phone. The request for a telephonic
appearance was denied, but the hearing
was rescheduled. Although it had been
given notice of the new hearing date, no
one appeared on behalf of S Industries.
At the conclusion of the hearing, Judge
Lindberg, having reviewed all the
submitted papers, awarded attorneys fees
of $136,803.

  S Industries then filed a motion for
reconsideration, arguing that the fee
amount was decided ex parte and repeating
its argument that an award of attorneys
fees was precluded by a prior settlement
agreement. Judge Lindberg referred this
motion for reconsideration to Magistrate
Judge Ashman, who also held that no prior
settlement agreement on attorneys fees
existed between the parties. However,
Judge Ashman gave S Industries the
benefit of the doubt concerning the
amount of the award, vacated it, and
returned the matter to Judge Lindberg for
further proceedings in light of the
"joint statement."

  Back before Judge Lindberg, the judge
noted that prior to awarding fees (the
$136,803), he had considered S
Industries’ statement. Moreover, he held
that Centra 2000 had provided adequate
evidentiary support for its billing
rates, hours worked, and other expenses,
and that S Industries never provided
specific objections to these amounts.
Thus, Judge Lindberg reinstated the award
of $136,803 in attorneys fees. On appeal,
S Industries claims that attorneys fees
were not warranted, contends that a prior
settlement agreement precluded the award
of fees, and contests the amount of the
fees awarded.

   We review a grant of attorney fees to
a prevailing defendant under the Lanham
Act only for clear error. Door Sys., Inc.
v. Pro-Line Door Sys., Inc., 126 F.3d
1028, 1031 (7th Cir. 1997). We will not
reverse a determination for clear error
unless it strikes us as wrong with the
force of a 5-week-old, unrefrigerated,
dead fish. See Parts and Elec. Motors,
Inc. v. Sterling Elec., Inc., 866 F.2d
228, 233 (7th Cir. 1988) (Bauer, J.).

  The Lanham Act provides that the court
"in exceptional cases may award
reasonable attorney fees to the
prevailing party." 15 U.S.C. sec.
1117(a). Where the defendant is the
prevailing party, the standard is not
whether the claimant filed suit in good
faith but rather whether plaintiff’s
action was oppressive. Door Sys., 126
F.3d at 1031. A suit is oppressive if it
lacked merit, had elements of an abuse of
process claim, and plaintiff’s conduct
unreasonably increased the cost of
defending against the suit. Id. Under the
Lanham Act, an award of attorneys fees is
committed to the trial court’s sound
discretion. BASF Corp. v. Old World
Trading Co., Inc., 41 F.3d 1081, 1099
(7th Cir. 1994).

  Judge Lindberg granted attorneys fees
both because S Industries’ trademark
claims were meritless and because of the
dilatory tactics it employed. Without
having a federal registration for the
"Sentra" mark for use on computer
software, S Industries filed suit
alleging infringement. Thus, from the
outset, S Industries had no
federallyprotected right to defend. In
fact, it appears it also had no product
to protect from infringement. During 4
years of litigation in this case, S
Industries failed to produce evidence of
a single sale of "Sentra" brand computer
software or hardware. It never produced
product packaging bearing the "Sentra"
mark on computer-related products, nor
did it present evidence of advertising
for "Sentra" brand computer software.
Although it claimed to have licensed the
mark to third-party producers in
computer-related fields, it failed to
produce evidence of these alleged
agreements. In fact, the only computer-
related licensing agreement that S
Industries appears to have negotiated was
an agreement with a producer of mouse
pads. So, there never was a threat that
consumers would have confused Centra
2000’s highly sophisticated, customized,
data management software, which is
licensed to institutions in the
petrochemical, aerospace, and
manufacturing industries, with over-the-
counter, discount mouse pads and sporting
goods bearing the "Sentra" mark./1 This
was not a murky case. Based solely on
the weakness of S Industries’ claims,
Judge Lindberg acted well within his
discretion in granting attorneys fees.

  And there is more. Not only did S
Industries forward indefensible claims,
but it added to the cost and aggravation
of this meritless litigation by not
responding to discovery requests,
repeatedly failing to properly serve or
sign motions filed with the court, and
failing to satisfy the requirements of
the local rules of the district court.
And all of this occurred before attorneys
fees were granted. Even after being
chided for filing an oppressive suit and
losing its opposition to an award of
attorneys fees, S Industries continued
its antics. It refused to cooperate with
Centra 2000 and provide specific
objections to the requested fee amounts.
It ignored a filing deadline, submitted
motions late, or failed to properly file
them at all. Its counsel missed a
scheduled hearing and then had the gall
to allege that the fee amount was
intentionally determined in his absence.
This last maneuver cost Centra 2000 an
additional 9 months of delay and required
two judges to again review S Industries’
unfounded arguments. Without a doubt,
this suit was oppressive and an award of
attorneys fees was warranted.

  Next, with annoying obstinacy, S
Industries again argues that the issue of
attorneys fees was decided by the parties
in a prior settlement agreement. This
argument has been rejected by both Judge
Lindberg and Magistrate Judge Ashman,
both of whom noted that no such agreement
existed./2 Having twice been presented
with the courts’ reasoning, and without
forwarding any new arguments on appeal,
it is difficult to believe that S
Industries can raise this issue in good
faith.
  We are also asked to reduce the amount
of the award. However, S Industries has
waived this argument by refusing to
participate in the fee determination
process. It had an opportunity to
challenge the fee amount several years
ago. It refused. It failed to cooperate
with Centra 2000 and never filed specific
objections to the fee schedule. Thus,
Centra 2000 was denied an opportunity to
respond by clarifying or supplementing
its records. Moreover, a year later S
Industries was given another chance to
state its concerns during a hearing which
its counsel neglected to attend. Having
defied Judge Lindberg’s order to confer
with Centra 2000 concerning the fee
amounts, and having failed to attend the
fee determination hearing, S Industries
has waived its objections. See Cleveland
Hair Clinic, Inc. v. Puig, 200 F.3d 1063,
1068 (7th Cir. 2000).

  Finally, we note that S Industries’
behavior in this case is not isolated. As
the cases collected in our first footnote
show, its actions here look to be part of
a pattern of abusive and improper
litigation with which the company and Lee
Stoller, its sole shareholder, have
burdened the courts of this circuit. As
Judge Gottschall in the district court
noted in a different case, the company
filed at least 33 trademark infringement
lawsuits in the district court between
1995 and 1997. S Industries, Inc. v.
Ecolab Inc., 1999 WL 162285 (N.D. Ill.
Mar. 16, 1999).

  Against this backdrop, we do not
hesitate to say that this appeal strikes
us as frivolous. For that reason, we
direct S Industries to show cause within
21 days why sanctions for filing a
frivolous appeal should not be imposed
under Rule 38 of the Federal Rules of
Appellate Procedure.

  For the reasons set forth above, we
AFFIRM the judgment of the trial court.

FOOTNOTES

/1
We note that this is not the first time S Indus-
tries has employed such tactics. See S Indus. v.
Diamond Multimedia Sys., Inc., 17 F. Supp. 2d 775
(N.D. Ill 1998) (Anderson, J.) (claimant’s trade-
mark registrations unrelated to alleged infringers’
products, awarding attorneys fees of $193,558,
where plaintiff’s claims were frivolous); S
Indus., Inc. v. Stone Age Equip., Inc., 12 F.
Supp. 2d 796, 819 (N.D. Ill. 1998) (Castillo, J.)
(defendants’ allegedly infringing products--shoes
and shoe-related products--not listed in SI’s
registration mark; awarding attorneys fee for
oppressive suit where "SI offered highly ques-
tionable [and perhaps fabricated] documents;
testimony from its principal that was inconsis-
tent, uncorroborated, and in some cases, demon-
strably false; affidavits from career SI witness-
es; and otherwise utterly inadequate evidence");
S Indus., Inc. v. JL Audio, Inc., 29 F. Supp. 2d
878 (N.D. Ill. 1998) (Coar, J.) (no likelihood of
confusion between expensive customized car audio
equipment and claimant’s cheap, off-the-shelf,
sporting goods; plaintiff offered no evidence of
continuous commercial use of its mark on related
goods); S Indus., Inc. v. Hobbico, Inc., 940 F.
Supp. 210 (N.D. Ill. 1996) (Shadur, J.) (com-
plaint deficient where registration did not
include defendant’s product--fishing tackle
floaters, issuing sua sponte order to show cause
why Rule 11 sanctions not warranted).

/2 In his February 2 order, Magistrate Judge Ashman
noted that this argument had already been reject-
ed by Judge Lindberg and held that "[t]here has
never been a settlement agreement between the
parties regarding this lawsuit. The parties did
reach an agreement before the Patent and Trade-
mark Office ("PTO"), but it had nothing to do
with this lawsuit. . . . The so-called ’settlement
agreement’ Plaintiff refers to is a document
drafted by the President of S Industries, Mr. Leo
Stoller, a non-lawyer, and signed by him only .
. . . Plaintiff’s argument that the ’entire
disputes’ language in a motion before an adminis-
trative tribunal signed only by Plaintiff applies
to this lawsuit is so entirely without merit that
it warrants no further discussion."