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Excell Consumer Products Ltd. v. Smart Candle LLC

United States District Court, S.D. New York

May 5, 2014

EXCELL CONSUMER PRODUCTS LTD., Plaintiff,
v.
SMART CANDLE LLC, and STRUCTURAL INTEGRITY PROPERTY SERVICES, LLC, Defendants.

MEMORANDUM OPINION AND ORDER

MARVIN E. ASPEN, District Judge.

Following a bench trial in April 2013, we entered judgment in favor of Plaintiff Excell Consumer Products Limited ("Excell") on September 17, 2013. In our memorandum opinion and order, dated September 10, 2013 ("Opinion"), we discussed in great detail the business relationship between Excell and its former distributor, Defendants Smart Candle, LLC and Structural Integrity Property Services, LLC (collectively, "Structural").[1] (Dkt. No. 51 (Op.).) We ultimately concluded that Excell, and not Structural, owned the disputed "Smartcandle" trademarks and related designs and logos associated with a brand of battery-operated electronic candles. As a result, we held Structural liable for unfair competition under the Lanham Act, cancelled Structural's trademark registrations, dismissed its counterclaims, and entered an injunction with a grace period.[2] (Op. at 42-48.)

We assume familiarity with the pretrial, trial, and posttrial record in this case and will not recount the lengthy history or factual background, except when necessary to our analysis below. By way of overview, and as detailed in the Opinion, we found that Excell and Structural entered into an oral distribution agreement in October 2004, but that the agreement did not establish Structural as Excell's exclusive distributor in the United States. (Op. at 9-17.) We held that Excell acquired ownership of the trademark after the trademark's original owner and Excell's licensor, Smartcandles.co.uk Limited ("SCK"), abandoned its rights in July 2007. ( Id. at 37-38.) Given the relationship between Excell and Structural and the absence of a written distribution agreement, we applied the legal presumption that Excell, as the foreign manufacturer of Smartcandle products, had a superior claim to the trademark over Structural, as a non-exclusive distributor. ( Id. at 41.)

Structural challenges our conclusions, and the application of that presumption, in its pending Motion for Amended or Additional Findings, and to Alter or Amend the Judgment, filed under seal on October 4, 2013.

STANDARD OF REVIEW

Under Rule 59(e), we may alter or amend a judgment if the moving party demonstrates that we "overlooked controlling decisions or material facts that were before [us] on the original motion" that might have materially influenced the outcome. Sikhs for Justice v. Nath, 893 F.Supp.2d 598, 605 (S.D.N.Y. 2012); Analytical Surveys, Inc. v. Tonga Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012); Arthur Glick Truck Sales, Inc. v. Stuphen East Corp., 11 C 2824, 2013 WL 4028184, at *2 (S.D.N.Y. Aug. 8, 2013); Lent v. Fashion Mall Partners, L.P., 243 F.R.D. 97, 98 (S.D.N.Y. 2007); see Fed.R.Civ.P. 59(e); Fed.R.Civ.P. 52(b) (allowing the court to "amend its findings-or make additional findings" and to "amend the judgment accordingly"). Thus, for example, we may grant reconsideration if presented with "an intervening change in controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Sikhs for Justice, 893 F.Supp.2d at 605 (internal quotation omitted); Arnold v. Geary, 09 C 7299, 2013 WL 5951489, at *2 (S.D.N.Y. Nov. 7, 2013); Arthur Glick Truck Sales, Inc., 2013 WL 4028184, at *2. The Second Circuit has instructed that "Rule 59 is not a vehicle for relitigating old issues, presenting the case under new theories, securing a rehearing on the merits, or otherwise taking a second bite at the apple." Analytical Surveys, Inc., 684 F.3d at 52 (internal quotation omitted); Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995); Sikhs for Justice, 893 F.Supp.2d at 605-06.

"Reconsideration is an extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources." Sikhs for Justice, 893 F.Supp.2d at 605 (internal quotation omitted); Arnold, 2013 WL 5951489, at *2; Arthur Glick Truck Sales, Inc., 2013 WL 4028184, at *2. Accordingly, the standard on such a motion is strict. Shrader, 70 F.3d at 257; Analytical Surveys, Inc., 684 F.3d at 52 (adding that denials of such motions "are reviewed only for abuse of discretion"); see Sikhs for Justice, 893 F.Supp.2d at 605.

ANALYSIS

As set forth in the Opinion, our judgment in favor of Excell rests largely on two determinations: (1) Structural was Excell's non-exclusive distributor; and (2) Excell was entitled to the presumption that a foreign manufacturer owns a trademark vis-à-vis a non-exclusive distributor. (Op. at 17, 37-42.) In its reconsideration motion, Structural takes issue with these two conclusions and related issues, which we assess below.

A. Distribution Relationship between Excell and Structural

We first consider Structural's argument that "no legally cognizable distribution agreement" existed between Structural and Excell. (Mem. at 11.) In its reconsideration motion, Structural identifies several misrepresentations of fact made by Excell's founder, Tim Cowley, during the parties' negotiations in 2004. (Mem. at 11; Reply at 3-6.) Specifically, Cowley represented to Structural's founders (Shane Vail and Joshua Kutzler) that Excell had the authority to let Structural use the Smartcandle marks and name, when Excell was simply a licensee of SCK and had no right to do so. (Mem. at 11.) Indeed, the parties do not dispute that Structural had no knowledge of SCK until 2009. ( See id.; Resp. at 11.) Structural further argues that Cowley misrepresented Excell's ownership of a manufacturing facility and development of a worldwide distribution network. (Reply at 5-6.) Structural contends that we overlooked the law governing contract formation when we concluded, despite Cowley's misrepresentations, that the parties entered into an oral distribution agreement in 2004. (Reply at 3-5 (stating that Structural could not have assented to enter into a contract under the circumstances).) Structural asserts that, to the contrary, the parties are separate and independent companies. (Mem. at 11-14 (arguing that Excell did not control either Structural's use of the mark or the quality of Smartcandle goods, as necessary for the companies to be considered "related" under the Lanham Act).)

There are two fundamental problems with Structural's argument. First, Structural did not previously raise any contract formation argument, and it cannot use Rule 59 to do so now. Analytical Surveys, Inc., 684 F.3d at 52; Shrader, 70 F.3d at 257; Sikhs for Justice, 893 F.Supp.2d at 605-06. Structural claims that this contract formation theory is "consistent with [its] argument at trial that [Excell] misrepresented its ability to create a distribution agreement." (Mem. at 11 n.2 (citing Defs.' Post-Trial Br. at 10-17).) At trial, and in its posttrial brief, Structural asserted ownership of the Smartcandle marks due to its registration thereof with the Patent Office. (Defs.' Post-Trial Br. at 1.) Structural further argued that Cowley's misrepresentations led Structural to believe that it was the exclusive Smartcandle distributor in the United States. ( Id. at 10-17; see also Defs.' Proposed Findings of Fact ¶¶ 154-71.) Based on those misrepresentations, Structural opposed Excell's request for cancellation of the trademarks because it did not make false statements or engage in fraud when it filed the disputed registrations.

In short, Structural used Cowley's misrepresentations as evidence that Structural did not intend to deceive the Patent Office because it honestly held a good faith belief that it could claim ownership of the marks. (Defs.' Post-Trial Br. at 8-15.) Structural did not use Cowley's misrepresentations as evidence that a contract never existed, or could not have existed, between it and Excell. Although the contract formation argument is "consistent with" the good faith defense Structural raised earlier, it is nonetheless an entirely new legal theory presented for the first time after judgment. We cannot have overlooked or misapplied the law of contract formation when Structural failed to disavow the contract in the first instance.

This holding highlights the second problem with Structural's current theory. Structural's present argument, including both the contract formation and independence components, completely contradicts its prior theory. Structural consistently asserted-before, at, and after trial-that the parties entered into an exclusive oral distribution ...


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