United States District Court, D. New Jersey
MEMORANDUM AND ORDER
G. SHERIDAN, U.S.D.J.
matter comes before the Court on Defendants Imagine This
Company, LLC, Twelve Inc., Beverly Moss and Michael Moss
(collectively referred to as "Imagine") motion for
attorney's fees, ECF No. 145. As the Court previously
found, this case involves "allegations by two competing
printing companies involved in the business of creating
novelty car magnets (such as dog bones), that each had copied
the other's purported design." (ECF No. 122). By way
of background, Plaintiff and Defendant entered into a
contract in which Imagine agreed to print dog. bone magnets
for Pet Gifts. After completion of the contract, Pet Gifts
alleges that Imagine commenced using its design and trade
dress for marketing dog bone magnets. Although the facts
proved otherwise, it was reasonable under the circumstances
for Pet Gifts to deduce same.
argues that an award of attorney's fees is appropriate on
three grounds: first, Section 35 of the Lanham Act permits
recovery of reasonable attorney's fees in exceptional
cases; second, an award of attorney's fees is appropriate
as Rule 11 sanction; and lastly, the attorney's fees are
proper here because Pet Gifts' counsel, Rutgers Law
Associates, unconstitutionally subsidized Pet Gifts with
taxpayer funds, in violation of the New Jersey State
response, Pet Gifts argues that it did not act in bad faith,
and that all three of Imagine's arguments are meritless,
premature, and brought in bad faith.
35 of the Lanham Act permits the recovery of reasonable
attorney's fees only "in exceptional cases." 15
U.S.C. § 1117(a). "[A] district court may find a
case 'exceptional' when (a) there is an unusual
discrepancy in the merits of the positions taken by the
parties or (b) the losing party has litigated the case in an
'unreasonable manner."' Fair Wind Sailing,
Inc. v. Dempster, 764 F.3d 303, 315 (3d Cir.
2014) (quoting Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 134 S.Ct. 1749, 1756 (2014)). Whether an
"exceptional case" exists rests within the district
court's discretion, after considering the totality of the
circumstances. Id. Courts may consider the following
factors in determining whether a fee award is appropriate,
including: "frivolousness, motivation, objective
unreasonableness (both in the factual and legal components of
the case) and the need in particular circumstances to advance
considerations of compensation and deterrence." Octane
Fitness, LLC, 572 U.S. at 554 n.6. "Courts ... have
awarded fees where the losing party has either pursued
baseless claims or engaged in inequitable conduct."
Renna v. Cnty. of Union, No. 11-3328, 2015 U.S.
Dist. LEXIS 1370, at *18 (D.N.J. Jan. 6, 2015).
Federal Rule of Civil Procedure 11 (b) allows a court to
impose sanctions, including attorney's fees, but only in
exceptional circumstances where a claim or motion is patently
unmeritorious or frivolous. Doering v. Union Cty. Bd.
of Chosen Freeholders, 857 F.2d 191, 194 (3d
Cir. 1998). Rule 11 provides:
presenting to the court - whether by signing, filing,
submitting, or later advocating - a pleading, written motion,
or other paper, an attorney or unrepresented party is
certifying that to the best of the person's knowledge,
information, and belief, formed after an inquiry reasonable
under the circumstances:
(1) it is not being presented for any improper purpose, such
as to harass, cause unnecessary delay, or needlessly increase
the cost of litigation;
(2) the claims, defenses, and other legal contentions are
warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or for
establishing new law;
(3) the factual contentions have evidentiary support or, if
specifically, so identified, will likely have evidentiary
support after a reasonable opportunity for further
investigation or discovery; and (4) the denials of factual
contentions are warranted on the evidence or, if
specifically, so identified, are reasonably based on belief
or a lack of information.
Fed. R. Civ. P. 11(b). The rule provides that if "the
court determines that Rule 11(b) has been violated, the court
may impose an appropriate sanction on any attorney, law firm,
or party that violated the rule or is responsible for the
violation." Fed.R.Civ.P. 11(c). However, "even
where such exceptional circumstances exist, the court is
merely authorized, not required, to impose sanctions."
Gonzalez v. Busy Place Early Learning Or., No.
14-6379, 2015 U.S. Dist. LEXIS 129032, at *14 (D.N.J. Sep.
25, 2015) (citing Bensalem Twp. v. Int'l Surplus
Lines Ins. Co., 38 F.3d 1303, 1314 (3dCir. 1994)).
Rule imposes an affirmative duty on the parties to conduct a
reasonable inquiry into the applicable law and facts prior to
filing." Bensalem Twp., 38 F.3d at 1314 (citing
Business Guides, Inc. v. Chromatic Communications
Enters., Inc., 498 U.S. 533, 551 (1991)). "An
inquiry is considered reasonable under the circumstances if
it provides the party with 'an objective knowledge or
belief at the time of the filing of a challenged paper that
the claim was well-grounded in law and fact."'
Id. (quoting Ford Motor Co. v. Summit Motor
Prods., Inc., 930 F.2d 277, 289 (3d Cir. 1991), cert,
denied, 112 S.Ct. 373 (1991) (internal quotation omitted)).
determining whether a fee award is appropriate, the Court
declines to find that this case was exceptional. It appears
that Imagine did not disclose at the time of the contract
that Imagine was Pet Gifts' competitor, and by
undertaking the work, it was inviting Pet Gifts to conclude
that Imagine "stole" their idea. As such, no fee is
warranted. Courts do not penalize plaintiffs for "being