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Marcel Fashions Grp. Inc. v. Lucky Brand Dungarees, Inc.

United States Court of Appeals for the Second Circuit

October 12, 2017, Argued; August 2, 2018, Decided

No. 17-0361-cv

Opinion

 [***1708]  [*233]   John M. Walker, Jr., Circuit Judge:

Plaintiff-Appellant Marcel Fashions Group, Inc. ("Marcel") and Defendants-Appellees Lucky Brand Dungarees, Inc. and affiliates ("Lucky Brand"), competitors in the apparel industry, have been hotly contesting their respective rights as to certain trademarks for nearly two decades. In this latest round, Marcel sues under the Lanham Act, alleging that Lucky Brand is infringing on Marcel's "Get Lucky" trademark through its use of "Lucky" on its merchandise, and that Lucky Brand does so in violation of an injunction entered in an earlier action between the parties. The district [**3]  court dismissed the action, concluding that Marcel released its claims through a 2003 settlement agreement that resolved an earlier substantially similar litigation between the parties. We conclude that the district court did so in error because res judicata precludes Lucky Brand from raising its release defense in this action. To arrive at that result, we determine that under certain conditions parties may be barred by claim preclusion from litigating defenses that they could have asserted in an earlier action, and that the conditions in this case warrant application of that defense preclusion1 principle. Consequently, we vacate the judgment entered by the district court and remand for further proceedings.

In a previous opinion vacating the entry of summary judgment dismissing the claims in Marcel's initial complaint, we discussed in detail the claims at issue in this case, as well as the parties' relevant history  [*234]  of litigation. Marcel Fashions Grp., Inc. v. Lucky Brand Dungarees, Inc., 779 F.3d 102, 105-07 (2d Cir. 2015) ("Marcel I"). We reiterate that discussion here to the extent necessary to frame the issues relevant to an assessment of Lucky Brand's release defense.2

The 2001 Action. The settlement agreement through which Lucky Brand in this action [**4]  asserts  [***1709]  Marcel released its claims resolved a 2001 suit in which Marcel sued Lucky Brand for its alleged infringement of Marcel's "Get Lucky" mark (the "2001 Action"). See Marcel I, 779 F.3d at 105. The agreement provided that, inter alia, Lucky Brand would "desist henceforth from use of 'Get Lucky,'" and, pertinent to this appeal, Marcel agreed, through Section 8(e) of the agreement, to release certain claims it might have in the future arising out of its trademarks:

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898 F.3d 232 *; 2018 U.S. App. LEXIS 21482 **; 127 U.S.P.Q.2D (BNA) 1707 ***

MARCEL FASHIONS GROUP, INC., Plaintiff-Appellant, v. LUCKY BRAND DUNGAREES, INC., LUCKY BRAND DUNGAREES STORES, INC., LEONARD GREEN & PARTNERS, L.P., LUCKY BRAND, LLC, LUCKY BRAND DUNGAREES STORES, LLC, KATE SPADE & CO., Defendants-Appellees, LIZ CLAIBORNE, INC., LBD ACQUISITION CO., LLC, Defendants.

Subsequent History: As Corrected August 7, 2018.

US Supreme Court certiorari granted by Lucky Brand Dungises v. Marcel Fashions Group, 2019 U.S. LEXIS 4403 (U.S., June 28, 2019)

Prior History:  [**1] Appeal from the United States District Court for the Southern District of New York. No. 11-cv-05523 — Laura Taylor Swain, Judge.

Plaintiff-Appellant Marcel Fashions Group, Inc. ("Marcel") and Defendants-Appellees Lucky Brand Dungarees, Inc. and affiliates ("Lucky Brand"), competitors in the apparel industry, have been hotly contesting their respective rights as to certain trademarks for nearly two decades. In this latest round, Marcel sues under the Lanham Act, alleging that Lucky Brand is infringing on Marcel's "Get Lucky" trademark through its use of "Lucky" on its merchandise, and that Lucky Brand does so in violation of an injunction entered in an earlier action between the parties. The district court dismissed the action, concluding that Marcel released its claims through a 2003 settlement agreement that resolved an earlier substantially similar litigation between the parties. We conclude that the district court did so in error because res judicata precludes Lucky Brand from raising its release defense in this action. To arrive at that result, we determine that under certain conditions parties may be barred by claim preclusion from litigating defenses that they could have asserted [**2]  in an earlier action, and that the conditions in this case warrant application of that defense preclusion principle.

Consequently, we VACATE the judgment entered by the district court and REMAND for further proceedings.

Marcel Fashions Group, Inc. v. Lucky Brand Dungarees, Inc., 2016 U.S. Dist. LEXIS 177483 (S.D.N.Y., Dec. 22, 2016)

CORE TERMS

Brand, preclusion, claim preclusion, issue preclusion, district court, infringement, defenses, res judicata, litigated, parties, unfair, earlier action, trademarks, offensive, settlement agreement, counterclaims, raising, registered, marks, asserting, invoking, collateral estoppel, motion to dismiss, previous action, instant action, proceedings, victorious, estoppel, courts

Civil Procedure, Appeals, Standards of Review, De Novo Review, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Judgments, Preclusion of Judgments, Res Judicata, Affirmative Defenses