January 13
Lucky Brand Dungarees v. Marcel Fashion Group
No. 18-1086, 2d Cir.
Preview by Michael Fischer, Online Editor
Lucky Brand Dungarees and Marcel Fashion group are two competitors within the apparel industry who each own various trademarks using the term “Lucky.” In 2001, Marcel sued Lucky Brand alleging that it violated its “Get Lucky” trademark and the two parties eventually settled their dispute with the understanding that Lucky Brand would no longer use the “Get Lucky” mark while Marcel agreed to release certain claims against Lucky Brand. Litigation between the parties arose again in 2005 and Lucky Brand filed a motion to dismiss, arguing that the release from the 2001 settlement agreement covered Marcel’s claims against Lucky Brand. The court denied the motion as premature, the case eventually went to trial, and the jury found in favor of Marcel, which resulted in an injunction against future use of the “Get Lucky” mark. Lucky Brand did not appeal the decision.
Marcel again filed suit in 2011 alleging that Lucky Brand’s ongoing use of certain trademarks violated the 2005 injunction. Following a reversal by the Second Circuit of the district court’s grant of summary judgement against Marcel, Lucky Brand moved to dismiss Marcel’s amended complaint by arguing again that their claims were barred by the 2001 release. In ruling in favor of Lucky Brand, the district court rejected Marcel’s argument that res judicata principles precluded Lucky Brand from offering the release defense. On appeal, the Second Circuit reversed, finding that res judicata principles apply to defenses and that since Lucky Brand could have adjudicated the release claim during the 2005 litigation, it was precluded from raising the release defense again. Lucky Brand appealed to the Supreme Court, which granted certiorari on June 28, 2019. The issue before the Court is whether federal preclusion principles can prohibit a defendant, who is facing a new claim, from raising defenses that were not actually litigated and resolved in any prior case between the parties.
Petitioner asserts that because the new suit involves different conduct, a different theory of liability, and a different period of time, the claims in the current action are not the same as the claims in the 2005 action. Reply Brief at 4, Lucky Brand Dungarees, Inc. v. Marcel Fashion Grp., Inc., No. 18-1086 (U.S. filed Dec. 12, 2019). Furthermore, Petitioner argues that Marcel may not argue otherwise because judicial estoppel precludes a party from relying on an argument in one phase of litigation that contradicts a previous argument on which they prevailed in a previous phase. Id. at 9. Additionally, Petitioner contends that the Court has previously held that res judicata does not bar a claim that could have been litigated and decided in previous cases because only issue preclusion applies in cases concerning a different cause of action, and issues are only precluded when the same matter actually at issue was already resolved in the previous case. Id. at 12–16 (citing Davis v. Brown, 94 U.S. 423 (1877)).
Respondent counters that res judicata principles bar defendants who lose in a lawsuit from raising in a subsequent lawsuit involving the same cause of action a defense that was available in the first suit. Brief for Respondent at 20–21, Lucky Brand, No. 18-1086 (U.S. filed Nov. 12, 2019). Respondent reasons that the prevention of repetitive litigation and finality interests underlying res judicata principles counsel against allowing defendants to raise the same defenses in subsequent litigation. Id. at 22. To that end, Respondent argues, many state and federal courts have recognized that res judicata principles apply to relitigation of all arguments offered to support or defeat a claim in prior litigation. Id. at 25–26. Respondent therefore argues that Davis does not apply because res judicata has evolved over time and that the Second Circuit correctly applied defense preclusion given that the two cases concern a common nucleus of operative facts and because its application was manifestly fair. Id. at 37–38, 42, 47–48.
Thole v. U.S. Bank, N.A.
No. 17-1712, 8th Cir.
Preview by Taylor Dowd, Senior Online Editor
Petitioners Thole and Smith are members of a defined benefits pension plan, which Respondent U.S. Bank sponsors and controls as a fiduciary. Petitioners sued U.S. Bank under the Employee Retirement Income Security Act (“ERISA”), seeking both injunctive relief and damages, and claiming U.S. Bank violated fiduciary duties by investing all of the plan’s assets in equities instead of diversifying and lowering the risk to plan members. The plan lost about $1 billion after markets crashed in 2008, and became underfunded. At the time of the suit, the plan’s funds fell below the minimum funding required for defined benefit plans under ERISA.
After the district court first rejected U.S. Bank’s claim that Petitioners lacked standing, however, U.S. Bank contributed to the plan, bringing the funding past the level required by ERISA. Consequently, the district court held that the case lacked standing because there was no case or controversy as required Article III, and the Eighth Circuit affirmed.
The Court will consider whether ERISA plan participants and beneficiaries may seek injunctive relief for misconduct and damages for losses from fiduciary breaches under 29 U.S.C. § 1132(a)(2)–(3) without showing individual losses or imminent risk of losses. Furthermore, the Court will determine if Petitioners have standing for their challenge.
Petitioners argue that in comparison to the amount of funds that would have been in the plan if Respondents fulfilled their fiduciary duties, the plan lacked hundreds of millions of dollars, even after the post hoc contribution. They argue that longstanding trust law demonstrates that plan participants are harmed when fiduciaries breach duties, regardless of whether they suffered individual financial loss. Furthermore, Petitioners argue that if they cannot enforce ERISA protections, which they should under ERISA and Article III jurisprudence, Respondents will be able to use the plan for their own benefit in disregard of plan participants as long as they maintain the minimum amount of money in the fund.
Respondents point out that the plan benefits are fixed, therefore fluctuations in plan funding will not affect Petitioners financially, absent an “apocalyptic cascade of failures.” Response Brief for U.S. Bank, N.A. at 1, Thole v. U.S. Bank, N.A., No. 17-1712 (U.S. filed Nov. 12, 2019). The outcome of the case will not affect Petitioners, Respondents argue, because in addition to the lack of financial effect, the district court already determined that the practices that occurred ten years ago that Petitioners are seeking to enjoin will not resume. Respondents claim that Article III requires an individual claimant to suffer a concrete injury, which they believe is lacking here. Respondents add that the trust law Petitioners cite does not cure the issue and ERISA does not grant rights that supersede Article III requirements.
In reply, Petitioners counter that “it defies reality” to claim that ERISA scaled back rights recognized by the common law of trusts. Reply Brief for the Petitioners at 1–2, Thole, No. 17-1712 (U.S. filed Dec. 12, 2019). They claim that if Respondents were correct, plan beneficiaries could almost never sue under ERISA, and point out that shareholders are an improper replacement for beneficiaries as claimants.
January 14
Kelly v. United States
No. 18-1059, 3d Cir.
Preview by Michael Fischer, Online Editor
On the morning of September 9, 2013, two of the three toll lanes for the upper-level entrance of New York City’s George Washington Bridge were closed as part of a purported traffic study. These lane closures lasted over four days and resulted in extensive traffic delays in Fort Lee, New Jersey. Following an investigation, it was later revealed that the lane closure fiasco was in reality an act of political payback orchestrated by staff members within then–Governor Chris Christie’s administration. Fort Lee Mayor Mark Sokolich had previously refused to endorse Christie’s bid for reelection and it was believed that the traffic jams were designed to cause extensive delays during the first week of Fort Lee’s school year as punishment. William Baroni, Jr. and Bridget Anne Kelly, both aides of Governor Christie, were later charged with conspiracy to obtain by fraud, knowingly convert, or intentionally misapply property of an organization receiving federal funds as well as the offense underlying that conspiracy. Baroni and Kelly were convicted on both counts and their convictions were affirmed by the Third Circuit Court of Appeals.
Defendants appealed to the Supreme Court and certiorari was granted on June 28, 2019. The issue on appeal before the Court is whether “a public official ‘defraud[s]’ the government of its property by advancing a ‘public policy reason’ for an official decision that is not her subjective ‘real reason’ for making the decision.” Petition for a Writ of Certiorari at i, Kelly v. United States, No. 18-1059 (U.S. filed Feb. 12, 2019).
On appeal, Petitioner Kelly contends that an official’s regulatory decision or inducement thereof is not an obtainment of property. Reply Brief for Petitioner at 16, Kelly, No. 18-1059 (U.S. filed Dec. 20, 2019). Petitioner asserts that regulatory power is not “property” under the fraud statutes and therefore, even deceitful methods of affecting regulatory actions are not schemes to “obtain property.” Id. Additionally, Petitioner argues that if an official does not “obtain property” by inducing the regulatory decision, then the official also does not “obtain” the decision’s implementation costs. Id. at 18. Finally, Petitioner emphasizes that no resources were devoted to private use since neither Baroni nor Kelly personally obtained money or property and to hold that this constitutes property fraud would give rise to the possibility that every sovereign decision could be characterized as “obtaining property.” Id. at 20.
Respondent counters that Petitioner committed property fraud by faking a traffic study to divert Port Authority resources because proof that a defendant obtained property through a material falsehood satisfies the statutory definition of fraud. Brief for the United States at 25, Kelly, No. 18-1059 (U.S. filed Nov. 22, 2019). Additionally, Respondent argues that Petitioner’s conduct satisfies the requirements for wire fraud, which includes lying for diversion of an “organization’s money, employee time, or other resources toward an otherwise unachievable end.” Id. at 28. Furthermore, Respondent contends that Petitioner mischaracterized the fraud for which she and Baroni were convicted, and explains that the fraud concerned the lie about the existence of a traffic study, not the concealment of their underlying political motives. Id. at 32–33. Finally, Respondent argues that affirming the convictions would not subject routine political conduct to federal fraud prosecutions because the illegal conduct in this case involved lying to obtain authority that the officials did not otherwise possess. Id. at 47.
Romag Fasteners Inc. v. Fossil Inc.
No. 18-1233, Fed. Cir.
Preview by Sean Lowry, Online Editor*
The question presented in Romag is whether a showing of willful infringement is an element of proof necessary to support an award of a trademark infringer’s profits under section 35 of the Lanham Act, 15 U.S.C. § 1117(a).
Section 43(a) of the Lanham Act prohibits trademark infringement, or false representations of another’s distinctive mark. Section 35 of the Act provides that a plaintiff is entitled to recover an infringer’s profits, “subject to the principles of equity,” if it establishes “a violation under section 1125(a).” 15 U.S.C. § 1117(a) (2018). Federal circuits are split six to six on whether willful infringement is necessary to recover in a trademark infringement suit. The circuits that do not require willful infringement use evidence of infringement as one factor among many in providing equitable relief to the plaintiff.
At trial, a jury found that Fossil infringed on Romag’s trademark rights for a magnetic fastener used in wallets, purses, handbags, etc., but the infringement was not willful. On appeal, the Federal Circuit Court of Appeals applied Second Circuit law (because the trial was heard in the District of Connecticut), which requires willful infringement to recover under the Act. Thus, Romag was not able to recover any profits from Fossil.
Petitioner makes two main arguments why the Court should hold that willful infringement is not necessary for a plaintiff to recover in a trademark infringement suit. First, statutory interpretation and recent legislative history of the Lanham Act indicate that Congress did not intend to include a willful infringement requirement. Second, a willful infringement requirement sets the bar too high for plaintiffs, thereby reducing the ability for federal law to deter potential infringers.
Respondents argue that the circuit split is not meaningful because plaintiffs are often denied an accounting of defendants’ profits when willfulness is not proven in cases heard by courts that do not explicitly require it. Respondents also argue that Congress, when it enacted the Lanham Act in 1946, intended to codify a long list of common-law cases that allowed a plaintiff to recover a portion of the defendant’s profits only if willful infringement was shown.
Among the amici briefs, the Intellectual Property Owners (“IPO”) Association, which represents companies and individuals in all industries and fields of technology who own or are interested in intellectual property rights, argues that willfulness should be required to recover defendant’s profits in a trademark infringement case. The IPO Association agrees with the two main points in the Respondents’ brief, arguing that the ability to recover a portion or all of defendant’s profits could actually provide compensation in excess of the actual damages suffered by the plaintiff. If that bar was lowered, then plaintiffs would have even more incentive and leverage to extract settlements from defendants. In contrast, the American Bar Association and the American Intellectual Property Law Association argue that reading the willfulness requirement into the law reduces flexibility in crafting equitable remedies and is inconsistent with the statutory scheme of trademark protections.
January 15
Babb v. Wilkie
No. 18-882, 11th Cir.
Preview by Boseul (Jenny) Jeong, Online Editor
The parties seek the Court’s interpretation of 29 U.S.C. § 633a(a), the federal-sector provision of the Age Discrimination in Employment Act of 1967 (“ADEA”), regarding whether it requires a plaintiff to prove that age was a “but-for” cause of the challenged action.
The first main issue is whether the text of § 633a(a) provides a but-for cause requirement. The core text at issue is the phrase “shall be made free from any discrimination based on age.” 29 U.S.C. § 633a(a) (2018) (emphasis added). The Petitioner argues that the ADEA requires federal employment decisions to be “made free from” any age discrimination, and thus age does not have to be a but-for cause. The Petitioner points out that § 633a(a) was based off of the federal-sector provision of Title VII which never required but-for causation for discrimination. Alternatively, the Petitioner suggests that the EEOC’s interpretation must be given Chevron deference. The Government, the respondent in this case, points to the phrase “based on” in § 633a(a), arguing that this signifies a requirement of but-for causation. It reasons that the plain meaning of “based on” calls for causal relation and that it is further supported by “the default rule” in tort law, which requires the plaintiff to prove but-for causation. Finally, the Government asserts that the history of § 633a(a) contradicts a diminished causation standard.
The second main issue is the implication of the new but-for causation rule applied to private-sector provisions of the ADEA. The Petitioner cites the Court’s precedents holding that § 633a(a) differs from the private-sector provisions, and argues that the practice relating to the private sector does not bear on that of the public sector. On the other hand, the Government expresses concern about creating anomalies by applying different standards to provisions in the same statute.
The Court’s ruling will most likely have a huge impact on not only public employees’ rights against age discrimination, but also other employment discrimination lawsuits by providing additional guidance on the causation standards.
January 21
Shular v. United States
No. 18-6662, 11th Cir.
Preview by Sean Lowry, Online Editor*
The question presented in Shular is whether the determination of a “serious drug offense” under the Armed Career Criminal Act (“ACCA”) requires the same categorical approach used in the determination of a “violent felony” under the ACCA.
The ACCA imposes a mandatory minimum term of 15 years in prison for anyone convicted of violating 18 U.S.C. § 922(g), which includes possession of a firearm by a convicted felon, if the defendant has three prior convictions for a “serious drug offense” or a “violent felony.” 18 U.S.C. § 924(e)(1). Courts have interpreted these statutory terms through the “categorical approach” announced by the Court in Taylor v. United States, 495 U.S. 575 (1990). Under the categorical approach, courts look to the statutory elements of an offense, rather than the facts of the defendant’s actual conduct, when determining whether a prior conviction meets the statutory definition for enhanced prison term sentences.
Eddie Lee Shular pled guilty to possession of a firearm as a previously convicted felon in violation of § 922(g). He was classified as an “armed career criminal” because of six prior Florida convictions for controlled substance offenses. At the district court, Shular objected to this classification. None of the Florida statutes used to convict Shular contained a mens rea element, so there was not a determination of whether he had knowledge that he sold controlled substances. Thus, according to Shular’s counsel, none of Shular’s Florida convictions would qualify as a “serious drug offense” under the categorical approach because the Florida crimes are broader than the generic drug analogues which require a mens rea element.
However, the district court overruled Shular’s objection and sentenced him to prison for the mandatory minimum of 15 years. The Eleventh Circuit applied its prior precedent in United States v. Smith, 775 F.3d 1262 (11th Cir. 2014), deciding that the categorical approach did not apply to the determination of “serious drug offenses.” Under Smith, the Eleventh Circuit does not use the categorical approach in defining serious drug offenses because the plain language of the ACCA definition “require[s] only that the predicate offense ‘involv[es]’ . . . certain activities related to controlled substances.” Id. at 1267.
In its petition and brief to the Court, counsel for Shular argue that the Eleventh Circuit’s approach conflicts with the Third, Sixth, and Ninth Circuits, which do use the categorical approach for determining a serious drug offense under the ACCA. These circuits compare the elements of the prior state drug conviction with the elements of the generic drug crime. Counsel for Shular claim that at least three other circuits other than the Eleventh Circuit reject the categorical approach in these instances, creating a three to four split.
The Solicitor General argues that the definition of “serious drug offense” in 18 U.S.C. § 924(e)(2)(A)(ii) does not include a mens rea component. Because the state law that was used to convict Shular regulated a controlled substance and involved the manufacture, distribution, or possession with intent to distribute or manufacture those substances, according to the Solicitor General, the Eleventh Circuit’s decision was correct. According to this view, the federal law definition does not include mens rea as to the exact nature of the substances manufactured, distributed, or possessed by a defendant.
GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC
No. 18-1048, 11th Cir.
Preview by Boseul (Jenny) Jeong, Online Editor
The parties seek the Court’s interpretation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) regarding the nonsignatories’ right to compel an arbitration agreement based on domestic legal doctrines such as equitable estoppel. Petitioner argues that such domestic legal doctrines apply to arbitration agreements that are subject to the New York Convention, absent other conflicts of law. Respondent argues that the scope of the Convention is limited to the parties of the written agreement.
The Petitioner’s argument focuses on the purpose of the Convention and how its own interpretation is consistent with the Convention’s principles. It emphasizes that the New York Convention was intended to promote arbitration. It points to Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009), in which the Court held that Chapter 1 of the Federal Arbitration Act, which governs domestic arbitration agreements, incorporates common-law doctrines, and urges the Court to extend the principle to the Convention. According to the Petitioner, the structure of the Convention, which leaves gaps in enforcement, contemplates parties’ reliance on domestic legal principles, consistent with the understanding of the parties and international consensus. It points to the Restatement by the United Nations Commission on International Trade Law as a reference. It also adds that the Eleventh Circuit’s interpretation will limit applications of other principles such as agency, assignment, and corporate succession.
On the other hand, Respondent focuses on what is explicitly mentioned in the Convention and how the literal differences are meaningful. It points to the Convention’s drafting history and advocates that the text should be limited to the parties who consented in writing. It emphasizes that the intention behind specifying the written agreement requirement was to ensure the certainty of the parties’ consent. This runs directly against applying non-consent-based enforcement with the equitable estoppel doctrine, according to the Respondent. The Respondent further argues that the arbitration agreement in question is governed by German law which does not recognize the Petitioner’s arguments, and thus the Court can affirm on an alternative ground as well.
It will be interesting to see what the Court will emphasize when interpreting the international treaties, and this case’s implications for other international disputes involving arbitration agreements.
January 22
Espinoza v. Montana Department of Revenue
No. 18-1195, Mont.
Preview by Taylor Dowd, Senior Online Editor
Montana’s scholarship program funds students attending qualifying private schools in the state. The Department of Revenue instituted a rule disqualifying religious schools from eligibility for the scholarship program, with the belief that the rule was necessary for the tax credit program, which gave a tax credit to those who donated to the program, to be constitutional under the Montana state constitution. The Montana Constitution contains a “no-aid” clause, adopted in 1972 to narrow the scope of the similar original clause, stating that government entities and public corporations “shall not make any direct or indirect appropriation or payment from any public fund or monies . . . or to aid any church, school, academy, seminary, college, university, or other literary or scientific institution, controlled in whole or in part by any church, sect, or denomination.” Mont. Const. art. X, § 6.
Parents of Montana students who attended religiously affiliated schools and therefore were ineligible for the scholarship program under the Montana Department of Revenue rule brought suit. The Montana Supreme Court held that the tax credit program violates the Montana Constitution, finding that the rule disqualifying religious schools exceeded rulemaking authority, and that the tax credit program allows the Montana legislature to indirectly fund religious schools which is impermissible under the no-aid provision.
The Supreme Court will decide whether invalidating the scholarship program because it funds religiously affiliated schools violates the First Amendment Religion Clauses or the Equal Protection Clause of the U.S. Constitution.
Petitioners argue that Montana’s decision to exclude religiously affiliated schools from the scholarship program demonstrates hostility to religion that violates the Free Exercise Clause. They assert that according to substantial precedent, the U.S. Constitution demands government neutrality toward religion. Respondent, the State of Montana, argues that although Montana may provide indirect aid to religiously affiliated schools through the scholarship program, it is not required to do so under the First Amendment Free Exercise Clause. Respondent also adds that allowing individuals to decide not to fund religiously affiliated schools through the tax credit program supports religious freedom, and that a government’s choice to separate church and state past what is required by the U.S. Constitution by excluding religious institutions from funding is a longstanding tradition.
Petitioners and supporting amici, including the United States, also claim that the no-aid provision in the Montana Constitution, also called a “Blaine Amendment” which in various forms appears in several state constitutions, is rooted in anti-Catholic animus and therefore should be unconstitutional. Petitioners explain that when discrimination is a “substantial or motivating factor” for enacting a law, the law violates the Equal Protection Clause. Brief for Petitioners at 29, Espinoza v. Mont. Dep’t of Revenue, No. 18-1195 (U.S. filed Sept. 11, 2019) (quoting Hunter v. Underwood, 471 U.S. 222, 225 (1985)). An amicus brief from the Baptist Joint Committee filed in support of Respondent, however, claims the evidence that the provision at issue has a hostile origin is lacking, and adds that these amendments responded to concerns about the impermissible establishment of religion. Respondent believes the no-aid provision meets rational basis review because it was supported by rational reasoning of the state congress, and therefore is valid under the Equal Protection Clause.
*Sean Lowry is a 3LE (Class of 2021) and Analyst in Public Finance at the Congressional Research Service (CRS). The views expressed are those of the author and are not necessarily those of the Library of Congress or CRS.
