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Flagstar Bank, FSB v. Freestar Bank

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF ILLINOIS


February 26, 2010

FLAGSTAR BANK, FSB, PLAINTIFF,
v.
FREESTAR BANK, N.A., DEFENDANT.

The opinion of the court was delivered by: Michael M. Mihm United States District Judge

ORDER

Now before the Court is Defendant Freestar Bank's ("Freestar") Motion for Attorneys' Fees and Costs [#73]. For the reasons set forth below, Defendant's Motion is DENIED.

Background

Plaintiff, Flagstar Bank ("Flagstar"), commenced this action against Freestar alleging trademark infringement under 15 U.S.C. § 1114, false designation of origin, false advertising, and trade dress infringement under 15 U.S.C. § 1125, and Illinois state common law trademark infringement. On November 13, 2009, the Court granted summary judgment in favor of Defendant, finding that the Defendant's use of its "Freestar" trademark would not create a likelihood of confusion with Plaintiff's "Flagstar" mark. Defendant then filed a Bill of Costs, which were taxed without objection, and subsequently filed this Motion for Fees and Costs. Plaintiff objects to the Motion, and this Order follows.

Discussion

Defendant moves for fees pursuant to section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a), which authorizes an award of fees to the prevailing party of a trademark dispute "in exceptional cases." The standard for determining whether defendants in a Lanham Act case are awarded attorney's fees is "malicious, fraudulent, deliberate, or willful" conduct on the part of the plaintiffs. Door Systems, Inc. v. Pro-Line Door Systems, Inc., 126 F.3d 1028, 1031 (7th Cir. 1997). For purposes of this inquiry, bringing a lawsuit in good faith, while properly characterized as a deliberate action, does not qualify as an "exceptional" case warranting an award of attorney's fees. Id at 1032. Instead, the court must consider whether the suit is "oppressive", notwithstanding the plaintiff's good faith, due to: lack of merit, elements of an abuse of process claim, and conduct by the plaintiff which unreasonably increased the costs of defending against the suit. S Industries, Inc. v. Centra 2000, Inc., 249 F.3d 625, 627 (7th Cir. 2001); see also Door Systems, 126 F.3d at 1032. Freestar claims that Plaintiff's suit was oppressive because Flagstar (1) filed claims based on a "stunningly weak case of infringement," (2) abused the court's processes by forcing Freestar to file multiple motions to compel, and (3) unreasonably escalated the costs of defending against its suit through "oppressive discovery practices".

Defendant relies on two Seventh Circuit cases to support its position. In S Industries v. Centra 2000, the district court's award of attorney's fees to the Defendant was upheld because "from the outset, S Industries had no federally protected right to defend" and "no product to protect from infringement." S Industries 249 F.3d at 627. The court also noted that the plaintiff "added to the cost and aggravation of this meritless litigation by not responding to discovery requests, repeatedly failing to properly serve or sign motions filed with the court, and failing to satisfy the requirements of the local rules of the district court. Id. at 627-28. Similarly, in Central Mfg. v. Brett, the Seventh Circuit upheld the award of attorney's fees to the defendants because the plaintiffs (1) filed the lawsuit without evidence to support its claim to rights in the mark, (2) ignored requests to produce documents, forcing the defendants to file motions to compel action, (3) offered confusing and misleading deposition testimony and (4) produced documents which made a mockery of the entire proceeding. Central Mfg., Inc. v. Brett, 492 F.3d 876, 884 (7th Cir. 2007). Both cases are clearly distinguishable from this matter.

Most importantly, as opposed to the plaintiffs in S Industries and Central Mfg., Flagstar did not file suit based on a "stunningly" weak case involving nonexistent federal rights. Flagstar clearly has a federally protected right to defend its registered marks against infringement. 15 U.S.C. § 1114(1); See 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 32:3 (4th ed. 2009) ("if plaintiff is the owner of a federal mark registration, it may sue in federal court for infringement of that registered mark"). This Court's conclusion that Flagstar's mark was clearly distinguishable from Freestar's in the marketplace, in part because Plaintiffs offered no evidence confirming the use of its mark in any overlapping geographical area,*fn1 does not negate the fact that Plaintiff's marks were registered and being used in commerce in Michigan, Indiana, and Georgia. Thus, although Plaintiff's case was weak, this lawsuit was not an utterly meritless attempt to defend a nonexistent federal right.

Regarding the abuse of process allegation, Freestar's argument in favor of awarding attorney's fees relies heavily on the fact that it filed two motions to compel after Plaintiff refused to clearly state whether it conducted surveys related to the litigation pursuant to Defendant's Request to Admit #4. In his April 28, 2009 Order, the Magistrate Judge commented that Plaintiff took a "convoluted approach" to this matter, noting that (1) Plaintiff gave "confusing answers" to Defendant's Request to Admit, (2) the survey question should have been plainly answered by the Plaintiff, and (3) Plaintiff's objections to the contrary were without merit. As a result, the Court settled the matter by granting the third motion to compel and declaring that "Plaintiff has admitted without valid objection that. it had not conducted any surveys of consumers.". (R. 33 at 2).

Both parties should exercise good faith and attempt to resolve discovery disputes before bringing them before the Court. Thus, three court orders to address this small issue was indeed three too many. However, Flagstar's behavior did not "effectively [make] a mockery of the entire proceeding." See Central Mnfg. 492 F.3d at 884. Quite simply, the Magistrate Judge ordered Flagstar to submit a plain answer to a simple question, and Flagstar did not do so. Instead, Plaintiff submitted a convoluted response which consisted of two supplemental responses and multiple general objections to the Request to Admit. Although Defendant argues otherwise, it is clear that Plaintiff's "convoluted approach," while undoubtedly an undue complication, was not an abuse of process.

Finally, Freestar asserts that Plaintiff's approach unreasonably increased the costs of defending against the suit. Flagstar submits a letter written by Plaintiff's counsel as evidence that Plaintiff was purposefully leading Defendant down a "blind discovery alley." (Def. Mot. Ex 6 at 2). The Court has reviewed the letter and believes that Plaintiff's reference to a "blind discovery alley" is merely an example of the overall tone of this litigation. The contentious nature of the parties' interactions is best summarized by the Magistrate in his April 28, 2009 text order:

"In this case that is less than 18 months old, there have now been filed five motions regarding discovery disputes. These motions were supported and opposed by ten often-unnecessarily-lengthy and venomous memos that required four separate orders. Counsel have previously been politely reminded of their obligations as officers of this Court to exercise good faith and to deal with each other fairly and professionally. That reminder is here reiterated. It will not be repeated as a reminder."

In sum, Defendant points to two specific instances to support its Motion: (1) Flagstar's refusal to give a clear answer to Defendant's Request to Admit and (2) Plaintiff's reference to a "blind discovery alley" in a letter. These actions do not indicate that Flagstar engaged in "malicious, fraudulent, deliberate, or willful" conduct during the litigation, and are insufficient indicators of an "oppressive" lawsuit. The Magistrate Judge denied the award of attorney's fees in its previous orders resolving Freestar's motions to compel, and Defendant has submitted no factual or legal basis upon which this Court is now persuaded to rule differently. Defendant's Motion for Attorneys Fees is therefore denied.

CONCLUSION

For the foregoing reasons, Freestar's Motion for Attorneys' Fees and Costs [#73] is DENIED.


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