Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc. - 140 S. Ct. 1589 (2020)

Rule:

Unlike issue preclusion, claim preclusion prevents parties from raising issues that could have been raised and decided in a prior action, even if they were not actually litigated. If a later suit advances the same claim as an earlier suit between the same parties, the earlier suit’s judgment prevents litigation of all grounds for, or defenses to, recovery that were previously available to the parties, regardless of whether they were asserted or determined in the prior proceeding. Suits involve the same claim (or cause of action) when they arise from the same transaction or involve a common nucleus of operative facts.

Facts:

Petitioners (collectively Lucky Brand) and respondent (Marcel) both use the word “Lucky” as part of their marks on jeans and other apparel. Marcel received a trademark registration for the phrase “Get Lucky,” and Lucky Brand uses the registered trademark “Lucky Brand” and other marks with the word “Lucky.” This has led to nearly 20 years of litigation, proceeding in three rounds. The first round resulted in a 2003 settlement agreement in which Lucky Brand agreed to stop using the phrase “Get Lucky” and Marcel agreed to release any claims regarding Lucky Brand’s use of its own trademarks. In the second round (2005 Action), Lucky Brand sued Marcel and its licensee for violating its trademarks. Marcel filed several counterclaims turning, as relevant here, on Lucky Brand’s alleged continued use of “Get Lucky,” but it did not claim that Lucky Brand’s use of its own marks alone infringed the “Get Lucky” mark. In both a motion to dismiss the counterclaims and an answer to them, Lucky Brand argued that the counterclaims were barred by the settlement agreement, but it did not invoke that defense later in the proceedings. The court in the 2005 Action permanently enjoined Lucky Brand from copying or imitating Marcel’s “Get Lucky” mark, and a jury found against Lucky Brand on Marcel’s remaining counterclaims. In the third round (2011 Action), Marcel sued Lucky Brand for continuing to infringe the “Get Lucky” mark, but it did not reprise its 2005 allegation about Lucky Brand’s use of the “Get Lucky” phrase. After protracted litigation, Lucky Brand moved to dismiss, arguing—for the first time since early in the 2005 Action—that Marcel had released its claims in the settlement agreement. Marcel countered that Lucky Brand could not invoke the release defense because it could have pursued that defense in the 2005 Action but did not. The District Court granted Lucky Brand’s motion to dismiss. The Second Circuit vacated and remanded, concluding that “defense preclusion” prohibited Lucky Brand from raising an unlitigated defense that it should have raised earlier.

Issue:

Can Marcel preclude Lucky Brand from raising new defenses?

Answer:

No.

Conclusion:

The court held that because Marcel’s 2011 Action challenged different conduct—and raised different claims—from the 2005 Action, Marcel cannot preclude Lucky Brand from raising new defenses. The third action and the previous action lacked a common nucleus of operative facts. Moreover, case law did not support a version of defense preclusion doctrine that extended to the facts of the instant case as the competitor's defense in the third action did not threaten the judgment issues in the prior action.