On May 14, 2020, the U.S. Supreme Court ruled that federal preclusion principles do not bar a defendant from raising a defense it failed to litigate in an earlier suit. Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc., U.S., 590 U.S. ___ (2020). The Court reversed and remanded the Second Circuit's decision.
Marcel sued Lucky Brand in 2001 alleging that Lucky Brand's use of "Get Lucky" infringed Marcel's trademark. The parties settled and Lucky Brand agreed to stop using the phrase "Get Lucky." In 2005, Lucky Brand sued Marcel for copying its designs and logos and Marcel counterclaimed on Lucky Brand's continued use of "Get Lucky." Lucky Brand argued that Marcel's counterclaims were barred by the settlement agreement. The court permanently enjoined Lucky Brand from copying or imitating "Get Lucky" mark and the jury found in favor of Marcel's counterclaims. In 2011, Marcel sued Lucky Brand for continuing to infringe "Get Lucky" mark but not the "Get Lucky" phrase. Lucky Brand moved to dismiss arguing that Marcel had released its claims in the settlement agreement. Marcel responded that Lucky Brand couldn't invoke the release defense because it failed to pursue that defense in the 2005 action. The District Court granted the motion to dismiss holding that Lucky Brand could assert its release doctrine and the settlement agreement barred Marcel's claims. The Second Circuit vacated the decision concluding that "defense preclusion" barred Lucky Brand from raising it in the 2011 suit.
In a unanimous decision, Justice Sotomayor explained that the Court has never recognized "defense preclusion" as a standalone category of res judicata and that "preclusion of defenses must [] satisfy the strictures of issue preclusion or claim preclusion." As the parties agreed that issue preclusion did not apply, Lucky Brand's defense could only be barred under claim preclusion which requires the causes of action to have a "common nucleus of operative facts." While the 2005 action was on Lucky Brand's use of "Get Lucky", the 2011 action alleged Lucky Brand's use of Marcel's other marks containing the word "Lucky" but not the use of "Get Lucky" itself. Further, the conduct in 2011 action occurred after the conclusion of the 2005 action and therefore, did not support claim preclusion.
Full text of the opinion is available here.
Marcel sued Lucky Brand in 2001 alleging that Lucky Brand's use of "Get Lucky" infringed Marcel's trademark. The parties settled and Lucky Brand agreed to stop using the phrase "Get Lucky." In 2005, Lucky Brand sued Marcel for copying its designs and logos and Marcel counterclaimed on Lucky Brand's continued use of "Get Lucky." Lucky Brand argued that Marcel's counterclaims were barred by the settlement agreement. The court permanently enjoined Lucky Brand from copying or imitating "Get Lucky" mark and the jury found in favor of Marcel's counterclaims. In 2011, Marcel sued Lucky Brand for continuing to infringe "Get Lucky" mark but not the "Get Lucky" phrase. Lucky Brand moved to dismiss arguing that Marcel had released its claims in the settlement agreement. Marcel responded that Lucky Brand couldn't invoke the release defense because it failed to pursue that defense in the 2005 action. The District Court granted the motion to dismiss holding that Lucky Brand could assert its release doctrine and the settlement agreement barred Marcel's claims. The Second Circuit vacated the decision concluding that "defense preclusion" barred Lucky Brand from raising it in the 2011 suit.
In a unanimous decision, Justice Sotomayor explained that the Court has never recognized "defense preclusion" as a standalone category of res judicata and that "preclusion of defenses must [] satisfy the strictures of issue preclusion or claim preclusion." As the parties agreed that issue preclusion did not apply, Lucky Brand's defense could only be barred under claim preclusion which requires the causes of action to have a "common nucleus of operative facts." While the 2005 action was on Lucky Brand's use of "Get Lucky", the 2011 action alleged Lucky Brand's use of Marcel's other marks containing the word "Lucky" but not the use of "Get Lucky" itself. Further, the conduct in 2011 action occurred after the conclusion of the 2005 action and therefore, did not support claim preclusion.
Full text of the opinion is available here.
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