It’s official—there’s no such thing as the doctrine of “defense preclusion.” The U.S. Supreme Court said so Thursday morning in a unanimous opinion by Justice Sonia Sotomayor.
The decision hands a win to clothing designer Lucky Brand Dungarees Inc. and Kirkland & Ellis in Lucky Brands’ 20-year fight with Marcel Fashions Group Inc. over the right to use the word Lucky on jeans and other apparel.
The question in Lucky Brand Dungarees v. Marcel Fashions Group was whether a litigant can be precluded from raising a defense that it could have asserted, but didn’t, in a previous trademark action against the same opponent. The answer in this case is no, because the new lawsuit did not raise the same trademarks and the same conduct.
“As the Second Circuit itself seemed to recognize” when it ruled in the case in 2018, “this Court has never explicitly recognized ‘defense preclusion’ as a standalone category of res judicata, unmoored from the two guideposts of issue preclusion and claim preclusion,” Sotomayor wrote. “Instead, our case law indicates that any such preclusion of defenses must, at a minimum, satisfy the strictures of issue preclusion or claim preclusion.”
The decision hands a win to Kirkland partner Dale Cendali, who was arguing her second case to the Supreme Court and first in 17 years. With her on the briefs were partners Claudia Ray, Mary Mazzello, John O’Quinn and Matthew Rowen. Marcel was represented by McDermott Will & Emery.
Cendali and her colleagues had argued that the Second Circuit “invented an entirely new variant of preclusion that is inconsistent with principles of both claim preclusion and issue preclusion and is irreconcilable with this Court’s case law."
The decision restarts litigation that stretches all the way back to 2001, when Miami-based Marcel sued Lucky Brand, alleging that the latter’s use of the phrase “Get Lucky” in advertisements infringed Marcel’s 1986 federal trademark registration of the word Lucky on clothing.
Lucky Brand, which is headquartered in Los Angeles, agreed as part of a 2003 settlement to stop using the phrase.
Lucky Brand then sued in 2005, accusing Marcel and its licensee of copying Lucky Brand designs and logos, and Marcel counterclaiming that Lucky Brand was continuing to use “Get Lucky” in violation of the settlement. A judge enjoined Lucky Brand from copying or imitating Marcel’s “Get Lucky” mark.
Then Marcel sued in 2011, alleging that Lucky Brand was impermissibly using the word “Lucky” in other marks. Lucky Brand argued that the 2003 settlement was limited to “Get Lucky,” and that Marcel had released the use of other “Lucky” marks in that settlement. U.S. District Judge Laura Taylor Swain of the Southern District of New York agreed, but the Second Circuit reversed, holding that Lucky Brand was precluded from raising that defense, because it could have raised it in the earlier litigation but failed to.
That’s wrong, Sotomayor concluded. “At bottom, the 2011 Action involved different marks, different legal theories, and different conduct—occurring at different times,” she wrote. “Because the two suits thus lacked a ‘common nucleus of operative facts,’ claim preclusion did not and could not bar Lucky Brand from asserting its settlement agreement defense in the 2011 Action.”