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Shoppers walk by a Lucky Brand Jeans shop.
Reuters/Fred Prouser
Can Lucky Brand get lucky in the high court?
RES JUDICATA

The Lucky Brand trademark case at SCOTUS may end in misfortune for all civil litigants

By Ephrat Livni in Washington DC

The latest battle in an epic legal war that began in 2001 is being fought in the US Supreme Court today. The case, which could change the nature of civil litigation itself, stems from a long and unfortunate dispute over the short, trademarked phrase “get lucky.”

Florida-based clothes wholesaler Marcel Fashion Group, which trademarked “get lucky,” has been fighting with denim maker Lucky Brand Dungarees about alleged infringement of the phrase in three different cases over nearly two decades. At this stage, their conflict isn’t about the words, though. It’s about a recent Second Circuit Court of Appeals decision barring Lucky from raising a defense in a new case that it hadn’t asserted in earlier litigations.

In other words, although the matters stems from a trademark dispute, the ruling that the high court is reviewing is about defenses more generally, and specifically a concept called “defense preclusion.” Their decision will thus apply to parties in any civil case and will influence how litigants strategize about future matters. It will determine whether defendants should settle—which is considered preferable for system efficiency—or fight bitterly to force judgments in order to preserve defenses for possible later cases, which would be an expensive and labor-intensive shift in litigation that could cost courts and parties dearly.

Lucky and Marcel have both advanced public policy arguments to support their positions, citing the case’s grave potential consequences for all. Oddly, however, those who generally promote policy positions on the public’s behalf have been unusually silent. Not a single organization or individual has filed a “friend of the court” brief in support of either party, which is rare in a Supreme Court matter. “To date, this case has garnered surprisingly little attention,” even though it “could affect the way all civil cases—not just trademark disputes—are litigated from now on,” wrote Catholic University law professor Megan LaBelle in SCOTUSBlog.

Serial litigants

Perhaps one reason for the reticence is that this conflict began long ago—and hasn’t stopped. The matter before the Supreme Court stems from the companies’ third lawsuit, which is inextricably intertwined with the first two.

In 2001, Marcel sued Lucky for using its trademarked phrase “get lucky.” In 2003, the parties settled, with Lucky agreeing not to use the formulation and Marcel releasing certain claims. The companies now disagree about the settlement’s terms. Marcel contends that it only agreed to release claims for violations Lucky made before the settlement, while Lucky says Marcel released claims related to all trademarks it registered ahead of the deal.

However, that’s not the Supreme Court’s major concern. It’s interested in the “defense preclusion” question, which stems from the companies’ next lawsuit.

In 2005, Lucky sued Marcel for licensing its “get lucky” trademark to a brand marketing gear starkly resembling its own. Marcel countersued, arguing that Lucky was still infringing on its trademark and violating their settlement. Lucky moved to dismiss the counterclaims, citing the agreement’s release terms. The district court denied the motion as premature and Lucky never re-asserted the defense.

The suit Lucky initiated ended with a win for Marcel. Lucky was ordered to pay $300,000 for breaching the settlement contract. The court also issued an injunction barring Lucky from using the trademarked “get lucky” formulation. Lucky didn’t appeal.

However, in 2011, Marcel again sued, this time claiming its nemesis was violating the injunction with various uses of “lucky.” But Lucky Brand successfully moved to dismiss, arguing that it was only barred from using “get lucky.”

Undeterred, Marcel appealed, arguing that it was raising new claims for new infringements that arose after the injunction was issued. The Second Circuit sided with Marcel and remanded the case back to the district court for reconsideration.

On the second go-around in the third litigation, Lucky again successfully moved to dismiss, this time on the grounds that Marcel released its claims when it settled the 2001 litigation. Again, Marcel appealed to the Second Circuit. This time, it argued that Lucky’s defense was precluded and should have been raised in the 2005 case.

The appeals court agreed, concluding that defense preclusion falls within the more general category of “claim preclusion” principles known as res judicata (meaning “a matter judged” in Latin). Res judicata bars parties from re-litigating claims and issues settled on the merits in prior cases. It’s meant to ensure an efficient system with reliable, final judgments.

Untangling civil procedure

Lucky argues that defense preclusion doesn’t serve the same purposes as the other preclusion rules because it incentivizes defendants to fight rather than settle, in case they may someday have to raise a defense. In its Supreme Court brief, Lucky points out that the justices’ own precedent and recent rulings from four other circuit courts have all held that res judicata does not bar new defenses when claims in a new case arise from subsequent events and unresolved issues.

The brand’s lawyers write, “The Second Circuit, however, has now held the opposite… Perversely, [its] novel ‘defense preclusion’ rule would force defendants to litigate every defense, no matter how peripheral, all the way to judgment in every case, lest a defense later be deemed ‘precluded’ in a case where it could actually make a difference.” They accuse the lower court of “invent[ing] an entirely new variant of preclusion that is inconsistent with principles of… preclusion and is irreconcilable with this Court’s case law.”

Marcel argues that the lower court’s decision was entirely consistent with precedent and the rules of civil procedure. “Defense preclusion is flexible and discretionary, and its application in this case was manifestly fair,” the company contends in its brief.

If anyone is equipped to wade through the thicket of history and rules at issue here and make sense of the mess, it’s justice Ruth Bader Ginsburg. She is a master of civil procedure, and just last week—speaking generally, not about this case specifically—Ginsburg sang the praises of technicalities, telling CNN’s Joan Biskupic that they are key to securing justice. So Ginsburg will no doubt have many questions for the parties.

But it’s too soon to say who will ultimately get lucky in this case. The court has until term’s end in late June to issue a decision.