Court Affirms Nike Will Pay Millions for Opponent’s Legal Fees After ‘Outrageous’ Conduct
A Pennsylvania judge has doubled down on his ruling stating that Nike must pay attorneys’ fees to Lontex Corp as part of its loss in a trademark suit brought by the smaller sportswear company over its “Cool Compression” mark.
The case, first filed at the very end of 2018, has taken years to put to bed, partially because Nike appealed the decision handed down by Pennsylvania’s Eastern District Court, which ruled that it had lost the trademark case and had, in fact, infringed on Lontex knowingly and willingly.
In that judgment, the district court judge ordered Nike to pay Lontex’s attorney fees because the case was “exceptional” in how the company’s attorneys chose to litigate it. The appeals court Nike argued its case before again ruled in favor of Lontex but noted that, on the issue of attorneys’ fees, the district court needed a more compelling argument that the case could truly be considered “exceptional” under the Lanham Act.
Watch on FN
As such, the attorneys’ fees debate was remanded back to the district court for re-examination.
As part of the vetting process, Judge Michael Baylson, the district court judge, appointed now-retired Pennsylvania Supreme Court Judge Jane Greenspan, who now serves as an arbitrator for JAMS, as a special master, tasked with helping him determine whether Nike’s conduct was extreme and “outrageous” enough to warrant paying millions of dollars’ worth of its opponent’s legal fees.
In late September, Greenspan shared her recommendation with Baylson; it stated that, based on her review of the case, there was sufficient evidence to characterize Nike’s conduct as “exceptional,” and thus, the company should pay out the legal fees.
It seems Baylson took Greenspan’s recommendation seriously. On October 16, the judge issued an order upholding the court’s previous position that the case was “exceptional” enough from Nike’s end that it caused undue cost and effort to the plaintiff and prevailing party, Lontex. His order was based in large part on what Greenspan wrote in her recommendation.
“Nike’s conduct was in several instances unreasonable and improper,” he wrote, noting that when he ordered Nike to bring a managerial witness that could share information about its sales strategy, the company failed to do so, which meant the court had to order the company to do so a second time.
“Nike’s non-compliance delayed the production of this witness by over six months,” Baylson wrote.
He also brought up a “very broad motion for summary judgment” Nike filed during the case, which forced both parties, as well as the court, to sift through extensive documentation the company submitted. At that time, Baylson called the case “exceptionally contentious in discovery proceedings,” which he used as part of his argument for exceptionality in the October filing.
He argued that, while Lontex addressed the proceedings appropriately and quickly in most cases, Nike failed to do so, even going so far as to threaten to “kill” Lontex’s business over the litigation, which Greenspan highlighted in her recommendation.
“Thre is evidence that Nike, as the far larger entity, threatened to ‘kill Lontex’s business’ with litigation costs,” she wrote. “This behavior goes beyond Nike’s ‘not unreasonable’ litigation strategy or tactics and creates an uncivil dynamic which is exceptional and caused greater expenditure on Lontex’s part than normal vigorous opposing litigation would create.”
That, alongside other actions from Nike, caused Baylson to state that Nike’s conduct was, at times, “aggressive and unnecessary,” causing delay and undue expense.
Lontex filed a motion before Baylson’s decision asking for an “inflation adjustment,” which, if granted, would have brought what Nike owed up to over $6.3 million. Baylson partially sided with Nike on that piece of the fees question, ordering the company to pay the originally awarded amount back to Lontex, not the inflation-adjusted rate. However, the judge ordered that Nike will be required to pay “market rate interest from remand until the time that the fee is paid by Nike.”
As part of the order from Baylson, Lontex will have the chance to file, by October 30, a supplemental motion for attorneys’ fees it accrued preparing briefs to submit to the district court after the appeals court ordered a review of exceptionality under the Lanham Act. If Lontex follows through with that—which, to date, it has not—Nike’s likely to be looking at more than the nearly $5 million in fees it already owes Lontex.
Nike did not return Sourcing Journal’s request for comment, and Lontex could not be reached for comment.
