Court Opinion

ID: 9905003
Source: CourtListenerOpinion
Date Created: 2023-11-28 17:01:48.405097+00
Date Added: 2024-06-11T09:22:54.392802
License: Public Domain

Appellate Case: 22-4020     Document: 010110959318      Date Filed: 11/28/2023   Page: 1
                                                                                 FILED
                                                                     United States Court of Appeals
                       UNITED STATES COURT OF APPEALS                        Tenth Circuit

                              FOR THE TENTH CIRCUIT                      November 28, 2023
                          _________________________________
                                                                        Christopher M. Wolpert
                                                                            Clerk of Court
  ALFWEAR, INC.,

        Plaintiff - Appellee,

  v.                                                        No. 22-4020
                                                    (D.C. No. 2:17-CV-00936-TC)
  MAST-JAEGERMEISTER US, INC.,                                (D. Utah)

        Defendant - Appellant.
                       _________________________________

                              ORDER AND JUDGMENT*
                          _________________________________

 Before HOLMES, Chief Judge, HARTZ, and MORITZ, Circuit Judges.
                    _________________________________

       After the district court granted summary judgment for Mast-Jaegermeister US,

 Inc. (MJUS) on Alfwear Inc.’s trademark infringement and unfair competition

 claims, MJUS moved for an award of prevailing-party attorney’s fees and costs under

 the Lanham Act, 15 U.S.C. § 1117(a), and Rule 54(d) of the Federal Rules of Civil

 Procedure. The district court denied the motion, concluding the case was not

       *
         After examining the briefs and appellate record, this panel has determined
 unanimously that oral argument would not materially assist in the determination of
 this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
 ordered submitted without oral argument. This order and judgment is not binding
 precedent, except under the doctrines of law of the case, res judicata, and collateral
 estoppel. It may be cited, however, for its persuasive value consistent with
 Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 22-4020    Document: 010110959318        Date Filed: 11/28/2023     Page: 2

 sufficiently exceptional to warrant an award under § 1117(a). MJUS appeals and,

 exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

                                   I.     Background

       The factual and procedural background of the case is described in detail in

 our decision affirming the grant of summary judgment. See Alfwear, Inc. v.

 Mast-Jaegermeister US, Inc., No. 21-4029, 2023 WL 5765891, at *1-3 (10th Cir.

 Sept. 7, 2023) (Alfwear I). We do not repeat that information here, but provide the

 following additional background information regarding the motion for fees and costs.

       Following entry of judgment, MJUS filed its motion along with a bill of costs.

 The district court clerk entered an order for taxable costs, and the motion for

 attorney’s fees and nontaxable costs proceeded to briefing. After a magistrate judge

 entered an order purporting to deny the motion, MJUS filed objections to the order

 and a notice of appeal to this court. We abated the appeal pending the district court’s

 decision on the objections. The district court treated the magistrate judge’s order as a

 report and recommendation and made a de novo determination of the portions of the

 order to which MJUS objected. See 28 U.S.C. § 636(b)(3); Fed. R. Civ. P. 72(b)(3);

 cf. Colo. Bldg. & Constr. Trades Council v. B.B. Andersen Constr. Co., 879 F.2d

 809, 811 (10th Cir. 1989) (recognizing that dispositive post-judgment matters may be

 assigned to magistrate judges under § 636(b)(3), subject to de novo review). The

 district court adopted the magistrate judge’s recommendation and denied the motion.

 We lifted the abatement and dismissed the appeal of the magistrate judge’s order for

 lack of jurisdiction because the order was not a final order by the district court and

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 was not directly appealable. See Alfwear, Inc. v. Mast-Jaegermeister US, Inc.,

 No. 21-4123, 2022 WL 1164853, at *1 (10th Cir. Mar. 24, 2022).

       MJUS then filed this appeal from the district court’s order. It challenges the

 order on two grounds. First, it argues that the court abused its discretion by denying

 prevailing-party attorney’s fees under the Lanham Act. Second, it argues that the

 court erred by refusing to award additional costs under Rule 54.

                            II.   Denial of Attorney’s Fees

    A. Standard of Review

       “We review orders granting or denying attorney’s fees under the Lanham Act

 for abuse of discretion.” Derma Pen, LLC v. 4EverYoung Ltd., 999 F.3d 1240, 1244

 (10th Cir. 2021). “An abuse of discretion has been characterized as an arbitrary,

 capricious, whimsical, or manifestly unreasonable judgment.” Xlear, Inc. v. Focus

 Nutrition, LLC, 893 F.3d 1227, 1233 (10th Cir. 2018) (internal quotation marks

 omitted). A court abuses its discretion when it “commits legal error, relies on clearly

 erroneous factual findings, or issues a ruling without any rational evidentiary basis.”

 Id. Under the abuse-of-discretion standard, we will reverse only if we have

 “a definite and firm conviction that the [district] court made a clear error of judgment

 or exceeded the bounds of permissible choice in the circumstances.” Lorillard

 Tobacco Co. v. Engida, 611 F.3d 1209, 1213 (10th Cir. 2010) (internal quotation

 marks omitted).

       To facilitate meaningful appellate review, a district court must “provide a

 concise but clear explanation of its reasons for” its ruling on a motion for attorney’s

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 fees. Xlear, 893 F.3d at 1233 (internal quotation marks omitted). The district court’s

 explanation must “provide enough analysis to satisfy us that its decision was not

 arbitrary.” Derma Pen, 999 F.3d at 1245 n.2 (emphasis and internal quotation marks

 omitted).

       Although we review the district court’s ruling for abuse of discretion, we

 review its underlying factual findings for clear error. See Lorillard Tobacco,

 611 F.3d at 1213. Under that standard, “[w]e . . . must uphold any district court

 finding that is permissible in light of the evidence.” Manning v. United States,

 146 F.3d 808, 813 (10th Cir. 1998) (internal quotation marks omitted). Thus, if the

 record supports “two permissible views of the evidence, the factfinder’s choice

 between them cannot be clearly erroneous.” Id. (internal quotation marks omitted).

    B. Legal Standards

       The Lanham Act allows a district court to award attorneys’ fees to a prevailing

 party only in “exceptional cases.” 15 U.S.C. § 1117(a). An exceptional case is one

 “that stands out from others with respect to the substantive strength of a party’s

 litigating position (considering both the governing law and the facts of the case) or

 the unreasonable manner in which the case was litigated.” Derma Pen, 999 F.3d

 at 1245 (internal quotation marks omitted). The prevailing party has the burden of

 demonstrating exceptionality by a preponderance of the evidence. Octane Fitness,

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 LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 557 (2014) (interpreting identical

 exceptional-case attorney fee provision in the Patent Act).1

       There is no “precise rule or formula for making” exceptional-case

 determinations. Id. at 554. A “case presenting either subjective bad faith or

 exceptionally meritless claims may sufficiently set itself apart from mine-run cases to

 warrant a fee award,” but it is “the rare case” in which a party’s non-sanctionable

 litigation conduct, even if unreasonable, is “so ‘exceptional’ as to justify an award of

 fees.” Id. Thus, aggressive litigation tactics and overreach do not necessarily

 transform an ordinary case into an exceptional one for which fee-shifting is

 warranted. Other non-exclusive factors that may support a finding of exceptionality

 include frivolousness, motivation, objective unreasonableness of the facts or legal

 theories, and the need to compensate the prevailing party or deter the losing party.

 Id. at 554 n.6; see also Derma Pen, 999 F.3d at 1246 (applying Octane Fitness test in

 Lanham Act case). “In more general terms, [courts] look to both the objective

 strength of a plaintiff[’]s Lanham Act claim and the plaintiff’s subjective

 motivations.” King v. PA Consulting Grp., Inc., 485 F.3d 577, 592 (10th Cir. 2007).

       District courts have broad discretion to decide whether a case is exceptional

 under the totality of the circumstances. See Derma Pen, 999 F.3d at 1246. Even

       1
          In Octane Fitness, the Supreme Court established the standards applicable
 under the exceptional-case attorney fees provision in the Patent Act, 35 U.S.C. § 285,
 which is identical to the one in the Lanham Act. Compare 15 U.S.C. § 1117(a) with
 35 U.S.C. § 285. In Derma Pen, we held that the Octane Fitness standard applies to
 fee awards for exceptional cases under the Lanham Act. Derma Pen, 999 F.3d
 at 1245.
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 when a court deems a case exceptional, it has discretion to decide whether the case is

 sufficiently exceptional to warrant a fee award. Nat’l Ass’n of Pro. Baseball

 Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1146 (10th Cir. 2000). On

 review, we are mindful that district courts are “particularly well-equipped” to decide

 whether a case is exceptional because they “live[] with the case over a prolonged

 period of time.” Derma Pen, 999 F.3d at 1244 (internal quotation marks omitted).

    C. Analysis

       Applying the Octane Fitness/Derma Pen test here, the district court concluded

 that the case was not exceptional because it did not stand out either based on the

 strength of Alfwear’s claims or its litigation conduct. MJUS insists it is entitled to an

 award of fees based on the “weakness of Alfwear’s claims from the case’s inception

 to summary judgment,” and its “serial vexatious” litigation tactics, Aplt. Opening Br.

 at 25-26, but we find no abuse of discretion in the district court’s ruling.

       MJUS maintains that the same evidence that led the district court to dismiss

 Alfwear’s case on summary judgment required a finding of exceptionality for

 purposes of an attorney’s fees award. But under the exceptionality requirement, fee

 awards are not used as a penalty for losing. See Nat’l Ass’n of Pro. Baseball

 Leagues, 223 F.3d at 1147 (“[I]t is not enough that the plaintiff does not prevail.

 Rather, to be an ‘exceptional’ case within the meaning of the statute, the plaintiff’s

 suit must lack any reasonable foundation.”). Thus, not every case dismissed on

 summary judgment can be considered exceptional. See Octane Fitness, 572 U.S.

 at 558 (remanding for exceptionality determination under the correct standard instead

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 of concluding that party awarded summary judgment was entitled to attorney’s fees).

 Indeed, if a district court awarded attorney’s fees every time it entered summary

 judgment, fee awards would be commonplace, not exceptional.

       Here, the district court explained that “if the case had been truly meritless

 from the outset, the court would have had no qualms about dismissing the case,” but

 Alfwear’s claims were “sufficiently meritorious” to survive MJUS’s motion to

 dismiss. Aplt. App., vol. XIX at 213 (internal quotation marks omitted). The court

 acknowledged that MJUS ultimately prevailed at summary judgment, but it correctly

 observed that “losing is not the benchmark for awarding attorneys’ fees.” Id. at 214.

 And despite MJUS’s argument that Alfwear “should [not] have filed suit in the first

 place,” the court found no “improper motive, objective unreasonableness, or bad

 faith” in Alfwear’s decision to do so. Id. In particular, the court found that

 Alfwear’s belief that there was a likelihood of confusion between the parties’

 trademarks was “objectively reasonable,” and that “[t]his was not a frivolous case.”

 Id. MJUS’s disagreement with these findings does not establish that they are clearly

 erroneous, and the district court did not abuse its discretion in concluding that

 Alfwear’s case was not so meritless that it rose to the level of exceptional.

       MJUS also takes issue with the district court’s conclusion that Alfwear’s

 litigation conduct did not justify a fees award. The court described the case as

 “contentious,” id. at 213, and found that “[b]oth parties engaged in hard-fought

 tactics,” id. at 212 (internal quotation marks omitted). It acknowledged MJUS’s

 argument that Alfwear engaged in abusive litigation conduct by, among other things,

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 filing proceedings before the Trademark Trial and Appeal Board (TTAB) and in

 another federal district court while this case was pending. But the court noted that

 MJUS was the first to seek relief outside this lawsuit by filing four TTAB

 proceedings and a declaratory judgment action in the other district court. Id. The

 court also noted that it had not “single[d] out either side’s behavior as crossing the

 line” but that it had “chided [MJUS] for forum shopping and for lodging accusations

 at Alfwear based on insinuation.” Id. at 213 (internal quotation marks omitted).

 Based on these findings and its consideration of “the totality of the circumstances,”

 the court concluded that “Alfwear’s litigation tactics are not enough to label this case

 exceptional.” Id. (internal quotation marks omitted).

        MJUS claims the record does not support the district court’s findings. It

 reiterates the same factual narrative and arguments it presented in its district court

 filings, and it maintains that the court failed to “analyz[e] the full procedural

 history,” Aplt. Opening Br. at 26, and “to properly weigh” the evidence, id. at 14. It

 characterizes its out-of-district litigation as a legitimate effort to protect its rights,

 and describes Alfwear’s as an improper attempt to shore up its claims in this case and

 to harass MJUS. Based on this narrative, MJUS says the district court “minimize[ed]

 the abusive manner in which Alfwear prosecuted this case,” and it takes issue with

 the court’s finding of “equivalence in the parties’ actions.” Id. at 26.

        It was within the court’s discretion to weigh the evidence regarding the

 parties’ litigation conduct in making its exceptionality determination, and because its

 “equivalence” finding is a permissible view of the evidence, we will not disturb it

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 even if, under MJUS’s narrative, the evidence also would have supported a different

 conclusion. See Manning, 146 F.3d at 813. MJUS’s attacks on the adequacy of the

 district court’s findings and analysis do not undermine its ruling. The court’s failure

 to mention each instance of alleged litigation abuse and to address every aspect of

 MJUS’s argument does not mean the court failed to consider the full story. Its

 explanation is sufficient to satisfy us that its decision was not arbitrary. See Derma

 Pen, 999 F.3d at 1245 n.2.

       MJUS’s arguments boil down to a disagreement with the outcome of the

 district court’s weighing of the evidence and its discretionary determination based on

 the totality of the circumstances that this case was not exceptional. We will not

 reweigh the evidence, however, and see no basis for setting aside the district court’s

 ruling. By the time the court decided the motion for fees, it had presided over this

 case for about five years. It was thus “singularly familiar” with the case and the

 parties, and it was in the best position to decide whether this is an “exceptional” or

 “routine” case, Derma Pen, 999 F.3d at 1245. The court applied the correct legal

 standard, its factual findings are not clearly erroneous, and its ruling has a rational

 evidentiary basis. Accordingly, we find no abuse of discretion in its exceptionality

 determination. See Xlear, 893 F.3d at 1233.2

       2
        Having concluded that the district court did not abuse its discretion in
 denying the motion for fees, we need not address MJUS’s arguments about the
 reasonableness of its attorney’s fees.

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                                   III.   Denial of Costs

        MJUS also argues that the district court erred by denying its motion for

  nontaxable costs pursuant to Rule 54(d). Specifically, MJUS insists it is entitled to

  recover its expert witness fees, third-party vendor fees, and TTAB filing fees

  incurred in defending against Alfwear’s claims. Again, we disagree.

     A. Legal Framework

        We review the district court’s ruling on a motion for costs under Rule 54(d)

  for abuse of discretion. See Rodriguez v. Whiting Farms, Inc., 360 F.3d 1180, 1190

  (10th Cir. 2004).

        As pertinent here, Rule 54(d) provides that “[u]nless a federal statute . . .

  provides otherwise, costs—other than attorney’s fees—should be allowed to the

  prevailing party.” Fed. R. Civ. P. 54(d)(1). “[T]he Supreme Court has placed strict

  limits on what can be awarded” under Rule 54(d)(1). Stender v. Archstone-Smith

  Operating Tr., 958 F.3d 938, 941 (10th Cir. 2020). The costs allowable under this

  rule are limited to the six categories of taxable “costs” Congress identified in the

  general costs statutes, 28 U.S.C. §§ 1821, 1920, which “define the full extent of a

  federal court’s power to shift litigation costs absent express statutory authority to go

  further.” Rimini St., Inc. v. Oracle USA, Inc., 139 S. Ct. 873, 877-78 (2019) (internal

  quotation marks omitted).

        A prevailing party may seek an award of nontaxable costs pursuant to a statute

  that provides for such an award. See Fed. R. Civ. P. 54(d)(2)(A), (B)(ii). But any

  statute allowing a costs award “will not be construed as authorizing an award of

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  litigation expenses beyond the six categories listed in §§ 1821 and 1920, absent an

  explicit statutory instruction to that effect.” Rimini St., 139 S. Ct. at 878.

     B. Analysis

         The district court correctly concluded that none of the nontaxable costs MJUS

  sought were recoverable under Rule 54(d)(1) because they are not listed in the

  general costs statute, 28 U.S.C. §§ 1821, 1920. See Stender, 958 F.3d at 941-42; see

  also Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 439 (1987) (holding

  that expert witness fees are not available under Federal Rule of Civil Procedure 54(d)

  because “when a prevailing party seeks reimbursement for fees paid to its own expert

  witnesses, a federal court is bound by the limit of [the general costs statute], absent

  contract or explicit statutory authority to the contrary”).

         We are not persuaded otherwise by MJUS’s insistence that “relevant case law”

  permits an award of its litigation costs under Rule 54(d)(1). Aplt. Opening Br.

  at 50-51 (capitalization omitted). The cases MJUS relies on hold that a court

  may award nontaxable costs as part of a prevailing-party attorney’s fees award or

  pursuant to the court’s inherent authority to impose sanctions in cases where the

  non-prevailing party acted fraudulently or in bad faith. They do not hold that a court

  may award nontaxable costs such as non-court appointed expert witness fees under

  Rule 54(d)(1), and both we and the Supreme Court have expressly held otherwise.

  See Stender, 958 F.3d at 941-42.

         Nor were MJUS’s nontaxable costs recoverable under Rule 54(d)(2) and the

  Lanham Act. For starters, the Lanham Act provides that successful plaintiffs are

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  entitled to “the costs of the action,” and does not specifically provide for an award of

  costs to a successful defendant. See 15 U.S.C. § 1117(a). Moreover, even if a

  successful defendant is entitled to an award of costs under § 1117(a), the allowable

  costs would not include nontaxable litigation expenses because the statute does not

  explicitly authorize the award of costs beyond those listed in the general costs statute.

  See Rimini St., 139 S. Ct. at 877-78 (holding that the authorization in 42 U.S.C.

  § 1988 to award “full costs” does not provide the “explicit statutory authority”

  required to award costs, including expert witness fees, beyond those provided by

  §§ 1920 and 1821 (internal quotation marks omitted)); Reazin v. Blue Cross & Blue

  Shield of Kan., Inc., 899 F.2d 951, 981-82 (10th Cir. 1990) (holding that expert

  witness fees are not recoverable under the attorney’s fees provision in the Clayton

  Act, which does not expressly allow costs and fees in excess of the general cost

  statute). An award of nontaxable costs under § 1117(a)’s prevailing-party fee-

  shifting provision was precluded by the district court’s determination, which we have

  already upheld, that this case is not exceptional. See Mathis v. Spears, 857 F.2d 749,

  759 (Fed. Cir. 1988) (recognizing that an award of reasonable expert witness fees is

  permissible under the Patent Act’s exceptional-case fee-shifting provision “only upon

  a finding of” exceptionality).

        Finally, a district court has the inherent authority to award attorney’s fees and

  related expenses as a sanction for the losing party’s bad faith, see Chambers v.

  NASCO, Inc., 501 U.S. 32, 46 (1991), but such an award was foreclosed here by the

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  district court’s finding that Alfwear did not act in bad faith, see Mountain W. Mines,

  Inc. v. Cleveland-Cliffs Iron Co., 470 F.3d 947, 954 (10th Cir. 2006).

                                    IV.    Conclusion

        We affirm the district court’s order denying MJUS’s motion for attorneys fees

  and costs. We provisionally granted both parties’ motions to file their briefs and

  portions of its appendix under seal, along with publicly-filed redacted versions of the

  briefs and appendix, subject to a reconsideration by the merits panel. We now make

  our provisional orders permanent.

                                             Entered for the Court

                                             Jerome A. Holmes
                                             Chief Judge

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