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Only lawyers ‘got lucky’ in drawn-out lawsuit

The enormous hit taken by the hospitality and tourism industries became sadly predictable by the middle of March.

But did you foresee the troubles bearing down on the denim business, too?

Just as meal kit companies have profited from the pain of restaurants, so athleisure’s gain has been blue jeans’ loss. Levi’s reported a 62% sales drop in the second quarter and laid off hundreds. But the real carnage has been on the higher end, in the stores where cut-offs go for $128. The parent of Joe’s Jeans warned that it might not be able to continue as a going concern. Bankruptcy has overtaken True Religion, G-Star RAW, and, as of July 3, Lucky Brand Dungarees.

That gave Lucky Brand just seven weeks to savor its recent victory in the U.S. Supreme Court. In May, the court unanimously ruled in Lucky Brand’s favor in litigation that’s been going on, with two short breaks, since 2001.

Lucky Brand was founded in Los Angeles in 1990, five years after another company, the wholesaler Marcel Fashions Group, started up in Miami. In 1986, Marcel trademarked the phrase “Get Lucky,” which it uses as a trade name. Its website is headed: “Marcel Fashions dba Get Lucky.”

Now, the word “lucky,” derived from the Anglo-Saxon, has been in use in English since at least the 15th century, according to the Online Etymology Dictionary. The phrase “get lucky” is such an obvious extension that it must have followed soon after. And how long do you think it took sniggering Oxford undergraduates to give the phrase its second meaning? Sixteenth century by the latest, I’d say.

But Marcel Fashions Group was apparently the first American company to trademark it. And so when Lucky Brand decided its previous ads were too subtle and began selling skin-tight jeans with the slogan, “Get lucky,” Marcel was ready to pounce. It filed its first trademark infringement suit against Lucky Brand in 2001.

The companies fought for two years before reaching the inevitable settlement by which Lucky Brand agreed to stop using the trademarked phrase. But, as Justice Sonia Sotomayor wrote, “the ink was barely dry on the settlement agreement” before the companies were at it again. This time, Lucky Brand started it, claiming that Marcel was copying its designs.

Marcel fired back with a counterclaim alleging that Lucky Brand was still using the slogan it had agreed not to use. Marcel was able to present conclusive proof of its counterclaim. The district court permanently enjoined Lucky Brand from using the phrase and, after a jury trial, ordered it to pay $300,000 in damages.

But that wasn’t enough for Marcel. In 2011, it went for the kill, filing a new suit asking the court to “enjoin Lucky Brand from using any of Lucky Brand’s marks containing the word ‘Lucky.'” It was trying to stop Lucky Brand from using its own name.

The companies spent the next nine years arguing about what they were arguing about. Lucky Brand first claimed that Marcel was just relitigating the original case, and the district court agreed, dismissing the suit. Marcel appealed, contending that it was instead complaining about Lucky Brand’s continuing use of marks other than the “Get lucky” slogan. The 2nd Circuit Court of Appeals agreed, sending the case back for trial.

Back in trial court, Lucky Brand claimed it should win based on language in the original settlement agreement. Marcel countered that Lucky Brand was precluded from raising that defense because it could have raised it previously but failed to do so. The district court again ruled for Lucky Brand and the 2nd Circuit again sided with Marcel, becoming one of the few federal courts to adopt the controversial doctrine of “defense preclusion.”

Lucky Brand then took the case to the Supreme Court, which unanimously ruled that the 2nd Circuit didn’t know what it was talking about. Sotomayor’s opinion for the court used slightly more diplomatic language than that. But even if “defense preclusion” is a thing, it would apply only when the current claims are identical to previously-litigated claims, while the claims raised in the third round of litigation (involving the use of the word “lucky” by itself) were obviously different than those at issue in the first two rounds.

The Supreme Court sent the case back to the lower courts for further proceedings. Immediately, the parties began fighting about which lower court should hear it, the district court or the 2nd Circuit. Their renewed brawling was rudely interrupted by Lucky Brand’s Chapter 11 filing, which imposed an automatic stay on all litigation outside of bankruptcy court.

Still, somebody got lucky: the lawyers.

Joel Jacobsen is an author who in 2015 retired from a 29-year legal career. If there are topics you would like to see covered in future columns, please write him at legal.column.tips@gmail.com.

 

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