Court Opinion

ID: 6320806
Source: CourtListenerOpinion
Date Created: 2022-03-07 18:01:09.14731+00
Date Added: 2024-06-11T09:02:38.643139
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

HARBOR BREEZE CORPORATION, a              No. 19-56138
California corporation; L.A.
WATERFRONT CRUISES, LLC, a                   D.C. No.
California limited liability company,     8:17-cv-01613-
                 Plaintiffs-Appellants,     CJC-DFM

                  v.
                                            OPINION
NEWPORT LANDING SPORTFISHING,
INC., a California corporation;
DAVEY’S LOCKER SPORTFISHING,
INC., a California corporation;
OCEAN EXPLORER, INC., a California
corporation; FREELANCE
SPORTFISHING, INC., a California
corporation; DOES, 1–10,
                Defendants-Appellees.

      Appeal from the United States District Court
         for the Central District of California
      Cormac J. Carney, District Judge, Presiding

          Argued and Submitted March 3, 2021
                 Pasadena, California

                   Filed March 7, 2022
2 HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING

 Before: Stephen A. Higginson, * Andrew D. Hurwitz, and
            Daniel P. Collins, Circuit Judges.

                     Opinion by Judge Collins

                            SUMMARY **

                             Lanham Act

    The panel reversed in part and vacated in part the district
court’s judgment, after a jury trial, awarding only injunctive
relief in favor of plaintiffs in an action under the Lanham
Act.

   Harbor Breeze Corp. and its affiliate sued Newport
Landing Sportfishing, Inc., and its affiliates for unfair
competition. The jury found that defendants had engaged in
materially false or misleading advertising about their
competing whale-watching-cruise business, but the jury
awarded $0 in actual damages and also declined to award the
equitable remedy of disgorgement of profits. The district
court then issued a permanent injunction prohibiting
defendants from engaging in specified future acts of false
advertising, and denied plaintiffs’ request for attorneys’ fees.

   Reversing in part, the panel held that under Romag
Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), the

    *
      The Honorable Stephen A. Higginson, United States Circuit Judge
for the U.S. Court of Appeals for the Fifth Circuit, sitting by designation.
    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
   HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING 3

district court erred in instructing the jury that, in order to be
awarded defendants’ profits from their alleged false
advertising, plaintiffs had to show that defendants acted
willfully. Rather, under the correct legal standard, a
defendant’s mental state is a highly important consideration
in determining whether an award of profits is appropriate.
The panel reversed the judgment to the extent that it denied
an award of profits and remanded for a new trial on that
issue.

    The panel declined plaintiffs’ request to remand the case
with specific instructions to conduct a new jury trial on
disgorgement of profits, an equitable issue ordinarily left to
the court. The panel concluded that neither plaintiffs nor
defendants were equitably estopped from making arguments
about whether the jury verdict on profits was binding under
Federal Rule of Civil Procedure 39(c)(2) or merely advisory
under Rule 39(c)(1). Distinguishing a Third Circuit case, the
panel concluded that because the prior verdict on the issue
of disgorgement was defective, no valid portion of that
verdict would be disrespected, implicitly or explicitly, by
allowing a bench trial on remand. The panel held that Rule
39(c) did not require that the retrial on remand be a jury trial.

    Because retrial of the disgorgement issue could affect the
district court’s assessment of some of the relevant
circumstances, the panel also vacated the district court’s
attorneys’ fee determination.

                         COUNSEL

Amy Mason Saharia (argued) and Lisa S. Blatt, Williams &
Connolly LLP, Washington, D.C.; Daniel C. DeCarlo and
Joshua S. Hodas, Lewis Brisbois Bisgaard & Smith LLP,
4 HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING

Los Angeles, California; Lann G. McIntyre, Lewis Brisbois
Bisgaard & Smith LLP, San Diego, California; for Plaintiffs-
Appellants.

Todd R. Wulffson (argued), Denisha P. McKenzie (argued),
Serafin H. Tagarao, and Alessandra C. Whipple, CDF Labor
Law LLP, Irvine, California; for Defendants-Appellees.

                              OPINION

COLLINS, Circuit Judge:

    Plaintiffs-Appellants Harbor Breeze Corporation and its
affiliate L.A. Waterfront Cruises, LLC sued Defendants-
Appellees Newport Landing Sportfishing, Inc. and its
affiliates Davey’s Locker Sportfishing, Inc.; Ocean
Explorer, Inc.; and Freelance Sportfishing, Inc. for alleged
unfair competition in violation of § 43 of the Lanham Act,
see 15 U.S.C. § 1125(a). A jury found that Defendants had
engaged in materially false or misleading advertising about
their competing whale-watching-cruise business in violation
of the Lanham Act, but the jury awarded $0 in actual
damages. The jury also declined to award the equitable
remedy of disgorgement of profits, which had been
submitted to the jury with the agreement of all parties. The
district court then issued a permanent injunction prohibiting
Defendants from engaging in specified future acts of false
advertising, denied Plaintiffs’ request for attorneys’ fees,
and entered judgment. 1 Plaintiffs timely appealed. We have

    1
       Plaintiffs also asserted parallel claims under California’s Unfair
Competition Law, see CAL. BUS. & PROF. CODE § 17220 et seq., and
False Advertising Law, see id. § 17500 et seq. In their post-trial motions,
Plaintiffs relied only on the Lanham Act in seeking monetary relief, but
    HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING 5

jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse in
part, vacate in part, and remand.

                                    I

    Pursuant to then-existing Ninth Circuit precedent
construing the remedies provision of the Lanham Act, see
Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d
426, 439 (9th Cir. 2017) (construing § 35(a) of the Act,
15 U.S.C. § 1117(a)), the jury instructions provided that, in
order to be awarded Defendants’ profits from their alleged
false advertising, Plaintiffs had to show that Defendants
acted willfully. However, in Romag Fasteners, Inc. v.
Fossil, Inc., 140 S. Ct. 1492 (2020), the Supreme Court
abrogated Stone Creek on this point and held that willfulness
is not an “inflexible precondition to recovery” of a
defendant’s profits under § 35(a). Id. at 1497. Instead, a
“defendant’s mental state is a highly important
consideration in determining whether an award of profits is
appropriate.” Id. (emphasis added). The jury instructions
here thus failed to recite the correct legal standard. Viewed
in the context of the evidence and the arguments at trial, the
error would ordinarily warrant reversal of the judgment. See
Sanders v. City of Newport, 657 F.3d 772, 781 (9th Cir.
2011) (“When the trial court erroneously adds an extra
element to the plaintiff’s burden of proof, it is unlikely that
the error will be harmless.”) (simplified).

they relied on all three statutes in seeking an injunction. Although the
district court’s final judgment does not expressly cite any statutes, we
construe the judgment’s injunction for “false advertising” as resting
upon, and disposing of, all of Plaintiffs’ claims. No party has contended
that the presence of these additional claims has any bearing on the issues
presented on appeal.
6 HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING

    Defendants nonetheless assert that any error in the jury
instructions is immaterial because the decision whether to
award the equitable remedy of disgorgement of profits
ultimately belonged to the district court, and that court
properly exercised its discretion to deny such an award in a
post-trial ruling that was consistent with what the Supreme
Court later held in Romag. This contention fails. Although
the district court’s ruling stated that the court would “reach
the same result” as the jury on the issue of disgorgement
even if the court “were to take its own view of the evidence,”
the order’s analysis is not consistent with Romag. In
describing the applicable legal standards governing
disgorgement, the order expressly recites Stone Creek’s
willfulness requirement. And in explaining why the court
would reach the same conclusion as the jury, the order
focuses only on the evidence of Defendants’ intent and
concludes that, “[b]ecause Plaintiffs have failed to prove that
Defendants’ false advertising was willful, Plaintiffs’ motion
for [an] order for disgorgement of profits” was denied
(emphasis added).

    Defendants alternatively argue that the district court’s
order should be affirmed because Plaintiffs’ post-trial
motion for disgorgement of profits “could have been denied
even if [Plaintiffs] had demonstrated willfulness.” This
contention fails because the order never purports to
determine that, even if willfulness had been established, the
district court would decline to award disgorgement in the
exercise of its discretion.

    Accordingly, we reverse the judgment to the extent that
it denies an award of profits and remand for a new trial on
that issue.
    HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING 7

                                   II

   We decline Plaintiffs’ request to remand the case with
specific instructions to conduct a new jury trial.

    The parties agree that disgorgement of profits is an
equitable issue ordinarily left to the court. See Fifty-Six
Hope Rd. Music, Ltd. v. A.V.E.L.A., Inc., 778 F.3d 1059,
1075 (9th Cir. 2015). However, that issue was submitted to
the jury in this case. After the jury awarded $0 in profits, the
parties’ post-trial submissions disputed whether the
equitable issue of disgorgement had been submitted to the
jury on an advisory basis under Federal Rule of Civil
Procedure 39(c)(1) or on a binding basis under Rule
39(c)(2). 2 Plaintiffs argued that the jury verdict on profits
was merely advisory, while Defendants argued that the jury
verdict was binding. The district court agreed with
Defendants, although it also expressly stated that it would
reach the same conclusion if it “were to take its own view of
the evidence.”

    The parties have effectively swapped positions on
appeal. Plaintiffs now argue that the jury issued a binding,
but ultimately flawed, verdict on the disgorgement issue
under Rule 39(c)(2), whereas Defendants assert that
Plaintiffs are bound by their position below that the jury
rendered an advisory verdict under Rule 39(c)(1). On the
issue of a retrial, Plaintiffs assert that a binding jury trial
under Rule 39(c)(2) must therefore be conducted on remand,
and Defendants contend that the parties and the district court
    2
      In the proposed joint pretrial conference order, the parties agreed
that all monetary remedies would be submitted to the jury, without
saying whether that decision would be advisory. By contrast, the court
expressly stated that it was submitting factual issues concerning
Defendants’ unclean hands defense to the jury in an advisory capacity.
8 HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING

may decide afresh on remand whether and how to consent to
a jury retrial.

    We are thus presented with two issues to decide. First,
each side contends that the other is judicially estopped from
adopting its current position and that we should rule
accordingly on the merits. Second, Plaintiffs also contend
that, even if judicial estoppel does not apply, a jury trial on
remand is required here under Rule 39(c). We address these
arguments in turn.

                              A

    We have described the standards governing judicial
estoppel as follows:

       Although judicial estoppel is probably not
       reducible to any general formulation of
       principle, several factors typically inform the
       decision whether to apply the doctrine in a
       particular case. First, a party’s later position
       must be clearly inconsistent with its earlier
       position. Second, courts regularly inquire
       whether the party has succeeded in
       persuading a court to accept that party’s
       earlier position, so that judicial acceptance of
       an inconsistent position in a later proceeding
       would create the perception that either the
       first or the second court was misled. A third
       consideration is whether the party seeking to
       assert an inconsistent position would derive
       an unfair advantage or impose an unfair
       detriment on the opposing party if not
       estopped. In enumerating these factors, we
       do not establish inflexible prerequisites or an
       exhaustive formula for determining the
    HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING 9

         applicability of judicial estoppel. Additional
         considerations may inform the doctrine’s
         application in specific factual contexts.

Ah Quin v. Cnty. of Kauai Dep’t of Transp., 733 F.3d 267,
270–71 (9th Cir. 2013) (simplified). Applying these
standards, we conclude that application of judicial estoppel
is unwarranted here as to either side.

     As explained earlier, we have set aside the jury’s verdict,
and the accompanying judgment, with respect to
disgorgement of profits. As a result, the parties’ dispute as
to whether that verdict was advisory or binding is now
entirely beside the point. Whether the next trial should be a
jury trial with an advisory verdict under Rule 39(c)(1), a jury
trial with a binding verdict under Rule 39(c)(2), or a court
trial under Rule 39(b) is not the same question as
determining what happened, procedurally, at the prior trial.
See infra at 10–11. Viewed that way, neither side’s change
of position is “clearly inconsistent with its earlier position.”
Ah Quin, 733 F.3d at 270 (citations and internal quotation
marks omitted).

    For similar reasons, the fact that each side may have
opportunistically shifted its arguments about whether the
prior trial was conducted under Rule 39(c)(1) or Rule
39(c)(2) does not give rise to “an unfair advantage or impose
an unfair detriment on the opposing” side. 3 Id.

     3
       Plaintiffs also overstate the significance of Defendants’ success in
persuading the district court to adopt the view that the prior verdict was
binding. Ah Quin, 733 F.3d at 270. Because the district court expressly
stated that it would also reach the same conclusion even under Plaintiffs’
view that the verdict was advisory, Defendants’ success below on the
10 HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING

   Accordingly, we decline to apply estoppel to either side
with respect to these issues.

                                  B

    Plaintiffs alternatively argue that, under Bereda v.
Pickering Creek Indus. Park, Inc., 865 F.2d 49 (3d Cir.
1989), Rule 39(c) itself requires a jury trial in any retrial on
remand and “does not permit the district court to withdraw
its prior consent to the litigants’ request for a nonadvisory
jury.” Id. at 55. In addressing this issue, we assume that the
prior jury trial of the disgorgement issue in this case was
conducted under Rule 39(c)(2). See Alcatel USA, Inc. v. DGI
Techs., Inc., 166 F.3d 772, 795–96 (5th Cir. 1999) (holding
that where a jury demand has been made, an issue is
submitted to the jury without objection, and “the possibility
that the jury’s findings might be advisory was never
mentioned until after the verdict was returned,” the verdict
is binding under Rule 39(c)(2)). We nonetheless conclude
that Bereda is distinguishable.

     In Bereda, the jury issued a binding verdict under Rule
39(c)(2), finding that Bereda was entitled to a substantial
award of backpay for unlawful sex discrimination, but the
district court plainly erred in failing to inform the jury that,
under the applicable laws, backpay was only available for a
specified number of years. 865 F.2d at 51, 53–54. The
defect in the jury’s verdict was thus partial and limited, and
it involved a specific issue as to which there was no right to
a jury trial. Id. at 52, 54–55. However, because the court of
appeals could not determine from the record what portion of
the monetary award was valid and what portion was invalid,

binding-verdict issue was ultimately irrelevant to the district court’s
denial of disgorgement.
   HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING 11

a new trial on the issue of backpay was required. Id. at 54–
55. Under these circumstances, the court concluded that
allowing a de novo bench trial on remand would fail to give
“the same effect” to the prior verdict as if a jury trial “had
been a matter of right,” see FED. R. CIV. P. 39(c),” and would
put the plaintiff “in a worse position than she would have
been in but for the trial court’s error.” Id. at 55.

     By contrast, in this case, the prior verdict on the issue of
disgorgement was entirely defective because the standards
for determining the threshold eligibility for such an award
were misdescribed. Accordingly, unlike in Bereda, no valid
portion of that prior jury verdict would be disrespected,
implicitly or explicitly, by allowing a bench trial on remand.
By its terms, Rule 39(c)(2) requires only that the actual
“verdict” that was rendered by the jury be given “the same
effect as if a jury trial had been a matter of right,” and that
command has no further force when, as here, that verdict has
been set aside as fundamentally flawed. See FED. R. CIV. P.
39(c)(2). Were we to order a jury trial on remand, we would
not be giving “effect” to the jury’s earlier “verdict.” Instead,
we would be granting Plaintiffs a free-floating right to a jury
trial, as to a concededly equitable issue, that is untethered to
that now-vacated verdict. Rule 39(c)(2) does not grant that
broader right.

    Moreover, because Plaintiffs argued against giving
binding effect to the jury’s verdict below and affirmatively
requested a de novo determination of the issue by the district
court, this is not a situation, as in Bereda, in which Plaintiffs
are placed in a worse position on remand than what they had
argued below. 865 F.2d at 55.

    We therefore hold that Rule 39(c) does not require that
the retrial on remand be a jury trial.
12 HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING

                            III

    We also vacate the district court’s attorneys’ fee
determination. The Lanham Act allows a court to award
attorney fees to the prevailing party in cases that are
“exceptional” under the “totality of the circumstances.”
SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179,
1181 (9th Cir. 2016) (en banc) (quoting Octane Fitness, LLC
v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014)).
Because retrial of the disgorgement issue could affect the
assessment of some of the relevant circumstances, such as
“the manner in which the case was litigated” and the “need
in particular circumstances to advance considerations of
compensation and deterrence,” SunEarth, 839 F.3d at 1180–
81 (citations and internal quotation omitted), the district
court should make that determination after the disgorgement
issue has been resolved.

  REVERSED IN PART, VACATED IN PART, AND
REMANDED.