Fendi Adele, S.R.L. v. Ashley Reed Trading, Inc. , 507 F. App'x 26 ( 2013 )

11-3025-cv (L)
Fendi Adele, S.R.L. v. Ashley Reed Trading, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING
A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan Courthouse, 500 Pearl Street, in the City of New York, on the 4th day
of January, two thousand thirteen.
Present:
ROBERT A. KATZMANN,
BARRINGTON D. PARKER,
RICHARD C. WESLEY,
Circuit Judges.
________________________________________________
FENDI ADELE, S.R.L., FENDI S.R.L., FENDI NORTH AMERICA, INC.,
Plaintiffs-Appellees-Cross-Appellants,
v. Nos. 11-3025-cv (Lead)
11-3027-cv (Con)
11-3058-cv (XAP)
ASHLEY REED TRADING, INC., SCOTT RESSLER, JAMES RESSLER,
Defendants-Appellants-Cross-Appellees.
________________________________________________
For Plaintiffs-Appellees
-Cross-Appellants: RICHARD L. MATTIACCIO, (Victor Genecin, Steven A.
Delchin, Samuel Spital, and Corrine A. Irish, on the
brief), Squire Sanders LLP, New York, NY
For Defendants-Appellants-Cross
-Appellees Ashley Reed Trading, Inc.
& Scott Ressler: GERARD F. DUNNE, Law Firm of Gerard F. Dunne,
New York, NY
For Defendant-Appellant
-Cross-Appellee James Ressler: DAVID I. SCHOEN, Montgomery, AL
Appeal from the United States District Court for the Southern District of New York
(Berman, J.).
ON CONSIDERATION WHEREOF, it is hereby ORDERED, ADJUDGED, and
DECREED that the judgment of the district court be and hereby is AFFIRMED IN PART,
VACATED IN PART AND REMANDED.
Defendants-Appellants-Cross-Appellees Ashley Reed Trading, Inc., Scott Ressler, and
James Ressler (collectively, “Ashley Reed”) appeal a June 30, 2011, judgment of the United
States District Court for the Southern District of New York (Berman, J.). On summary
judgment, the district court held Ashley Reed liable for trademark counterfeiting, false
designation of origin, and trademark dilution under the Lanham Act, 15 U.S.C. § 1051 et seq.,
and for unfair competition and trademark dilution under New York state law. The district court
awarded Plaintiffs-Appellees-Cross-Appellants Fendi Adele S.R.L., Fendi S.R.L., and Fendi
North America, Inc. (collectively, “Fendi”) $12,324,062.66 in trebled damages, prejudgment
interest, costs, and attorneys’ fees. Specifically, because it found willful infringement, the court
ordered the disgorgement of Ashley Reed’s profits from selling Fendi-branded products in 2005
and 2006.
2
On appeal, Ashley Reed contends that the district court erred by (1) rejecting its
affirmative defenses of acquiescence and laches, (2) admitting Leonardo Minerva’s testimony
that Fendi-branded products sold by Ashley Reed were counterfeit, (3) finding Ashley Reed
liable for infringement that occurred before 2005, (4) deciding on summary judgment that
Ashley Reed’s infringement was willful despite disputed questions of fact, and (5) failing to
deduct Ashley Reed’s costs from its gross revenue when calculating its profits. James Ressler
separately argues that the district court erred by refusing to stay his deposition pending
completion of criminal proceedings against him. On cross-appeal, Fendi challenges the district
court’s decision to award damages based only on Ashley Reed’s 2005 and 2006 profits even
though the court appeared to find the defendants liable from 2001 to 2004 as well.1 We assume
the parties’ familiarity with the underlying facts and procedural history of this case, as well as
the issues on appeal.
We review a district court’s grant of summary judgment de novo. 10 Ellicott Square
Court Corp. v. Mtn. Valley Indem. Co., 634 F.3d 112, 119 (2d Cir. 2011). Summary judgment is
“appropriate where there exists no genuine issue of material fact and, based on the undisputed
facts, the moving party is entitled to judgment as a matter of law.” Id. (internal quotation mark
omitted). The moving party must offer concrete evidence showing the absence of a disputed
issue of material fact, and then the burden shifts to the nonmoving party to present specific
evidence showing a genuine dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986).
1
Fendi argues that it is entitled to damages from 2000 to 2006, but the district court
stated that there was evidence of defendants’ awareness of counterfeit goods “since 2001,” so we
assume that the relevant period on appeal is 2001 to 2006.
3
We first address Ashley Reed’s contention that the affirmative defenses of acquiescence
and laches should have barred Fendi’s claims. To prove acquiescence, a defendant must
demonstrate that the plaintiff actively consented. Active consent means “conduct on the
plaintiff’s part that amount[s] to an assurance to the defendant, express or implied, that the
plaintiff would not assert his trademark rights against the defendant.” ProFitness Physical
Therapy Ctr. v. Pro-Fit Orthopedic & Sports Physical Therapy P.C., 314 F.3d 62, 68 (2d Cir.
2002) (alteration in original) (internal quotation marks omitted). Laches will bar a plaintiff’s
claim when a defendant has been prejudiced by a plaintiff’s unreasonable delay in bringing suit;
no affirmative consent is required because the unreasonable delay implies consent. Id. at 67.
Here, the parties agree that Ashley Reed bears the burden of proof.
Ashley Reed failed to prove either defense. There is no evidence that Fendi actively
consented to infringement by Ashley Reed. Although Fendi remained silent for several years
after the 2001 meetings between the parties, Fendi was entitled to investigate and was under no
obligation to respond. Ashley Reed was on notice that Fendi believed it was selling infringing
products. Moreover, Ashley Reed presented no evidence that Fendi unreasonably delayed in
filing suit. On the contrary, Fendi sued promptly after discovering counterfeit handbags that it
could prove were sold by Ashley Reed.
We next turn to Ashley Reed’s argument that the district court erred in considering
Leonardo Minerva’s deposition testimony, which Ashley Reed contends was inadmissible. The
district court “has wide discretion in determining which evidence is admissible [on summary
judgment, and] we review its evidentiary rulings for manifest error.” Nora Beverages, Inc. v.
Perrier Grp. of Am., Inc., 164 F.3d 736, 746 (2d Cir. 1998). Given this highly deferential
4
standard of review, we cannot say it was “manifest error” for the district court to conclude that
Minerva’s testimony was based on sufficient personal knowledge. Although Minerva’s assistant
performed the initial inspections of the allegedly counterfeit items and drafted the reports,
Minerva testified that he reviewed each report, discussed them with his assistant, made revisions
as necessary, and approved each report. As part of this process, Minerva looked at each item and
personally double-checked at least one indicator of the item’s counterfeit nature. He also
testified that he would not have signed a report if he thought it was inaccurate and that each
report he was shown refreshed his recollection of inspecting that item. Additionally, even
assuming that Minerva read directly from the reports during his testimony, the district court has
considerable discretion to permit a witness to consult a writing when the information is highly
detailed. See United States v. Riccardi, 174 F.2d 883, 890 (3d Cir. 1949) (allowing the witness
to read from a document when “the items . . . involved were so numerous that in the ordinary
course of events no one would be expected to recite them without having learned a list by rote
memory”).2
Ashley Reed does not dispute that Minerva’s testimony—if admissible—establishes its
liability for infringement during 2005 and 2006. However, it argues that a trial was necessary to
determine whether it infringed Fendi’s trademarks before 2005 because there was no direct proof
that it infringed during that period. Although Fendi did not produce any counterfeit items sold
2
See also S. Broun, McCormick on Evidence § 9 (6th ed. 2009) (“[When a document is]
so lengthy and detailed that even a witness with a fresh memory would realistically be unable to
recite all the items unaided,” a witness “may be unable to detail those facts from memory
without consulting the writing. Accordingly, the generalization that, once refreshed, a witness
must speak independently of the writing is too inflexible [and] the matter ought to be entrusted to
the trial judge's discretion.”).
5
by Ashley Reed before 2005, there is a significant amount of circumstantial evidence that
supports the district court’s apparent finding of liability.3 During that time, Ashley Reed was
operating under the same procedures as it was in 2005 when it sold the counterfeit bags
inspected by Minerva. As discussed further below, it failed to keep adequate records of its
transactions with its suppliers and to adequately check the authenticity of the goods it purchased.
Moreover, Fendi’s Chief Financial Officer compared invoices that Ashley Reed did retain to
legitimate Fendi records and concluded that many of Ashley Reed’s invoices—dated as early as
2000— were forgeries. Given that Ashley Reed was buying products with fabricated Fendi
invoices as early as 2000, it strains credulity to believe that none of these products were
counterfeit. The district court did not err in resolving Ashley Reed’s liability for the entire 2001
to 2006 period on summary judgment.
Once liability is established, Fendi’s entitlement to Ashley Reed’s profits depends upon
whether the infringement was willful. Fendi argues that it does not need to prove willfulness,
relying on decisions from some of our sister circuits holding that a 1999 amendment to the
Lanham Act changed the governing rule. See, e.g., Banjo Buddies, Inc. v. Renosky, 399 F.3d
168, 174 (3d Cir. 2005). However, we need not resolve the question because, assuming
arguendo that Fendi is still required to prove willfulness, the district court properly concluded on
summary judgment that Ashley Reed willfully infringed Fendi’s trademarks. To prove
willfulness, a “plaintiff must show (1) that the defendant was actually aware of the infringing
3
The district court did not make an explicit finding about the period of infringement, but
after the magistrate judge recommended that the case proceed to trial to determine whether
Ashley Reed was liable for infringement from 2001 to 2004, the court rejected this
recommendation and concluded that its previous decision on summary judgment had “resolved
the question of [Ashley Reed’s] liability for counterfeiting.”
6
activity, or (2) that the defendant’s actions were the result of reckless disregard or willful
blindness.” Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 263 (2d
Cir. 2005) (internal quotation marks omitted). In the context of a trademark infringement action,
willful blindness means that a defendant knew it might be selling infringing goods but
nevertheless “intentionally shielded itself from discovering” the truth. Tiffany (NJ) Inc. v. eBay
Inc., 600 F.3d 93, 109 (2d Cir. 2010). Despite Ashley Reed’s claims, willful blindness can be
proven on summary judgment; a finding of actual knowledge is not required. See, e.g., United
States v. 755 Forest Road, 985 F.2d 70, 73 (2d Cir. 1993).
Ashley Reed argues that the district court ignored reasonable inferences that should have
been drawn in its favor and, in doing so, improperly resolved disputed questions of material fact.
However, given the evidence, no reasonable jury could have credited these proposed inferences.
Ashley Reed was clearly on notice that it might be infringing trademarks after Fendi’s 2001
cease and desist letter and multiple lawsuits filed by other designers in 2000 and 2001.
Nevertheless, the record shows that Ashley Reed failed to adequately inquire about the
authenticity and original sources of the goods they purchased. Ashley Reed’s suppliers provided
defendants with “sanitized” invoices that did not disclose the original sources and, in some cases,
refused to provide any paperwork. Ashley Reed also failed to maintain records of their
transactions with suppliers and other key financial documents and did not retain any
documentation of its purported side-by-side comparisons of its goods with genuine Fendi
merchandise. Perhaps most tellingly, Ashley Reed returned its remaining Fendi merchandise to
its suppliers after Fendi filed suit instead of allowing it to be inspected and did not keep any
records concerning these goods or their return.
7
Under these circumstances, a reasonable jury could not conclude that Ashley Reed acted
with sufficient care to ensure that its goods were not counterfeit given that they were on notice of
the goods’ possibly counterfeit nature. Similarly, a reasonable jury could not credit Scott
Ressler’s testimony that he conducted side-by-side comparisons to ensure his products’
authenticity given the lack of records and obvious differences—according to Mr.
Minerva—between the counterfeit goods and genuine Fendi products. See Scott v. Harris, 550
U.S. 372, 378-80 (2007) (holding that a court should not credit testimony on summary judgment
when it is so clearly contradicted by other evidence that no reasonable jury could believe it).
Even if we credited Scott Ressler’s testimony that a Fendi inspector assured him that certain
goods from certain suppliers would be authentic, Ashley Reed does not contend that it purchased
all of its Fendi-branded products through those channels. Additionally, the other evidence
establishes that the defendants exhibited willful blindness with respect to the goods it acquired
through other channels. Therefore, the district court correctly concluded that Ashley Reed’s
infringement was willful as a matter of law.
Separate from his co-defendants, James Ressler contends that the district court should
have stayed his deposition until the termination of federal criminal proceedings against him.
This argument is without merit. As an initial matter, nothing prevented Mr. Ressler from
petitioning the district court to allow him to submit an affidavit after his criminal trial had ended;
however, he declined to do so. Moreover, we have held that in this context we will not disturb
“[a] decision so firmly within the discretion of the district court” unless “it vitiates a defendant’s
constitutional rights or otherwise gravely and unnecessarily prejudices the defendant’s ability to
defend his or her rights.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 100 (2d Cir.
8
2012). Here, the court accommodated Ressler by scheduling his deposition last. It considered
the possible prejudice to Mr. Ressler but ultimately concluded that a stay was inappropriate
because it was not necessary to protect Ressler’s Fifth Amendment rights and it would further
delay a discovery process that had already been significantly delayed. This was not an abuse of
discretion.
The final two issues both relate to the calculation of damages. The district court used
Ashley Reed’s revenues from selling Fendi-branded products as a proxy for its profit and did not
subtract any of the costs Ashley Reed might have expended in acquiring the bags or operating its
business. Ashley Reed argues that this was error. However, a defendant bears the burden to
prove any “deductions” from its gross revenue in calculating profits, Manhattan Industries, Inc.
v. Sweater Bee by Banff, Ltd., 885 F.2d 1, 7 (2d Cir. 1989), and Ashley Reed failed to present
any specific evidence of its costs. Therefore, the district court correctly declined to deduct any
of Ashley Reed’s purported costs.
On cross-appeal, Fendi contends that it was entitled to recover Ashley Reed’s profits
from 2000 to 2006 but that the district court’s award only covered 2005 and 2006. We agree that
the damage award seems facially inconsistent with the court’s apparent conclusion that Fendi
had proven infringement during the entire 2001 to 2006 period. The district court has the
discretion to award profits “subject to the principles of equity,” 15 U.S.C. § 1117(a), and
therefore could decide to award Fendi less than Ashley Reed’s total profits from 2001 to 2006 if
it believed that was the equitable result. The district court may have believed that this was the
case, but, if so, it did not explain its reasoning even after the magistrate judge pointed out the
apparent discrepancy. Under these circumstances, we vacate the current damage award and
9
remand to the district court for a determination in the first instance of whether it would be
equitable to award damages only for 2005 and 2006.4
For the reasons stated herein, the district court’s decision is AFFIRMED IN PART,
VACATED IN PART, and REMANDED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, CLERK
4
As noted above, we assume that the district court’s judgment covered the 2001 to 2006
period and not the year 2000. However, even if the district court determines that the relevant
period should begin in 2000, the court must also consider whether Fendi would be entitled to
damages for that period given that the cease and desist letter was not sent until 2001 and,
therefore, Ashley Reed may not have been on notice of its possible infringement.
10