Spectrum Assn v. Lifetime HOA ( 2021 )

Case: 20-50604 Document: 00515935980 Page: 1 Date Filed: 07/13/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
July 13, 2021
No. 20-50604 Lyle W. Cayce
Clerk
Spectrum Association Management of Texas, L.L.C.,
Plaintiff—Appellee/Cross-Appellant,
versus
Lifetime HOA Management L.L.C.; Jay Tuttle,
Defendants—Appellants/Cross-Appellees.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:18-CV-940
Before Dennis and Engelhardt, Circuit Judges, and Hicks,* Chief
District Judge.
Kurt D. Engelhardt, Circuit Judge:
Spectrum Association Management of Texas, L.L.C. (“Spectrum”)
sued Lifetime HOA Management, L.L.C. (“Lifetime”) and Jay Tuttle
(collectively the “Lifetime Defendants”) for trademark violations under the
Lanham Act. Spectrum was awarded statutory damages following a bench
trial. The district court declined to award Spectrum attorneys’ fees.
*
Chief District Judge for the Western District of Louisiana, sitting by designation.
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The Lifetime Defendants now appeal the damages award and the
district court’s admission of a witness’s deposition testimony at trial.
Spectrum cross-appeals the district court’s decision not to award attorneys’
fees. For the following reasons, we AFFIRM IN PART and REVERSE
AND REMAND IN PART.
I.
Spectrum provides management services to homeowners’
associations in San Antonio, marketing these services under its federally
registered trademarks—all of which include the words “Spectrum
Association Management”—and under its internet domain name
“spectrumam.com.” Tuttle served as Spectrum’s Director of Business
Development until April 2015, when he left the company. Pursuant to his
employment contract with Spectrum, Tuttle was prohibited from competing
with Spectrum for one year after his departure.
In February 2016, Tuttle assisted in forming Lifetime, a company that
offers the same type of homeowners’ association management services in San
Antonio as those provided by Spectrum. In May 2016, Tuttle registered the
internet domain “Spectrumhoamanagement.com” (the “Infringing
Domain”) on behalf of Lifetime. Internet users who entered the Infringing
Domain into a web browser were automatically forwarded to
“www.lifetimehoamanagement.com,” Lifetime’s marketing website for its
services. The Lifetime Defendants chose the Infringing Domain and set up
the forwarding mechanism with the intent to confuse internet users looking
for Spectrum’s services and divert those individuals to Lifetime’s website,
which offered substantially similar services.
After Spectrum discovered the Infringing Domain in 2018, it filed the
underlying lawsuit, alleging that the Lifetime Defendants violated the Anti-
Cybersquatting Consumer Protection Act (“ACPA”) section of the Lanham
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Act and requesting damages and permanent injunctive relief. Spectrum
ultimately elected to seek statutory damages pursuant to 15 U.S.C. § 1117(d).
The lawsuit originally was assigned to a district judge sitting in the San
Antonio Division of the Western District of Texas; however, the case was
later reassigned to a district judge sitting in the Waco Division of that same
district. Despite the reassignment, the case remained docketed in the San
Antonio Division for the duration of the lawsuit. On October 20, 2019, all
counsel were notified that trial would take place in Waco, not San Antonio.
On January 2, 2020, Spectrum’s pretrial filings identified Spencer Powell, a
former Lifetime partner, as a witness whose testimony was expected to be
presented at trial by means of his deposition transcript.
The district court conducted a bench trial in Waco on February 4,
2020. When Spectrum moved to admit Powell’s deposition testimony, the
Lifetime Defendants objected, arguing that there was no permissible use for
this testimony under Rule 32(a). Spectrum responded that because Powell
resided in San Antonio, a city located more than 100 miles from the place of
trial, he was an unavailable witness whose deposition testimony was
admissible under Rule 32(a)(4)(B). The district court agreed with Spectrum,
overruled the objection, and admitted Powell’s deposition testimony.
Following trial, the district court found that the Lifetime Defendants
violated the ACPA by registering and using the Infringing Domain, which
was confusingly similar to Spectrum’s trademarks. The district court issued
a final judgment that awarded Spectrum $100,000 in statutory damages and
permanently enjoined the Lifetime Defendants’ infringement of Spectrum’s
trademarks. The district court declined to award Spectrum attorneys’ fees.
The Lifetime Defendants challenged the damages award and the admission
of Powell’s deposition testimony in a motion to alter or amend the judgment,
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or alternatively, for new trial, which the district court denied. This appeal
and cross-appeal followed.
The Lifetime Defendants argue that the district court erred in
admitting Powell’s deposition testimony at trial and further erred in
imposing an excessive statutory damages award. Spectrum, in turn, contends
that the district court erred in declining to award attorneys’ fees.
II.
A district court’s damages award is a finding of fact, which we review
for clear error. Jauch v. Nautical Servs., Inc., 470 F.3d 207, 213 (5th Cir.
2006). We review de novo the conclusions of law underlying a damages
award. Id.A district court’s evidentiary findings are reviewed under an abuse of
discretion standard. Curtis v. M&S Petroleum, Inc., 174 F.3d 661, 667 (5th Cir.
1999). Evidentiary rulings are additionally subject to harmless error review,
“so even if a district court has abused its discretion, we will not reverse unless
the error affected the substantial rights of the parties” Mahmoud v. De Moss
Owners Ass’n, Inc., 865 F.3d 322, 327 (5th Cir. 2017) (citation omitted).
We review all aspects of a district court’s fee determination under the
Lanham Act—including its conclusion on whether a case is “exceptional”—
for abuse of discretion. All. for Good Gov’t v. Coal. for Better Gov’t, 919 F.3d
291, 295 (5th Cir. 2019).
III.
A. Admission of Spencer Powell’s Deposition Testimony
The Federal Rules of Civil Procedure permit a party to use a witness’s
deposition testimony “for any purpose” if the court finds that the witness is
unavailable by reason of residing “more than 100 miles from the place of
hearing or trial or is outside the United States, unless it appears that the
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witness’s absence was procured by the party offering the deposition.” FED.
R. CIV. P. 32(a)(4)(B) (emphasis added).
The Lifetime Defendants do not dispute that Powell, a San Antonio
resident, lived more than 100 miles from Waco, the physical location of trial.
Instead, they argue that we should interpret “the place of hearing or trial”
under Rule 32(a)(4)(B) as the location of the division governing the lawsuit.
Under this reading, they contend that Powell was not an unavailable trial
witness, because he resided within 100 miles of the San Antonio Division,
which governed the trial proceedings in this case. The Lifetime Defendants
cite no authority to support their proposed interpretation of Rule
32(a)(4)(B).
We do not agree that “the place of trial” under Rule 32(a)(4)(B) refers
to the division governing the lawsuit. Although there is no Fifth Circuit
decision directly on point, we are persuaded by the reasoning of a Fourth
Circuit decision that squarely addressed the issue. See Tatman v. Collins, 938
F.2d 509 (4th Cir. 1991). 1 In Tatman, the district court refused to admit a
witness’s deposition testimony at trial, in part, because the witness resided
within 100 miles of the border of the district governing the case—even
though the witness resided more than 100 miles from the courthouse where
trial was taking place. Id. at 510. The Fourth Circuit reversed the district
court’s decision, finding that “the place of trial is the courthouse where the
trial takes place.” Id. at 511. It reasoned that measuring distance from the
borders of the district rather than from the courthouse would provide a
variable standard of convenience dependent on the size of the district, the
location of the trial, and the location of the witness. Id. The Fourth Circuit
1
Although the Fourth Circuit examined a previous version of the Federal Rules of
Civil Procedure with the relevant subsection listed as Rule 32(a)(3)(B), the language of the
current subsection, Rule 32(a)(4)(B), remains the same.
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further noted that the drafters of Rule 32 specifically used the language
“place of trial,” rather than “the district” or other location descriptors
found in the Federal Rules of Civil Procedure. Id. We agree with the Fourth
Circuit that the plain text of Rule 32(a)(4)(B) is clear that “the place of trial”
is the courthouse where trial takes place.
The Lifetime Defendants further argue that they purposefully and
strategically declined to cross-examine Powell at his deposition under the
assumption that they would have the opportunity to cross-examine him as a
live witness at a San Antonio trial. They contend that they were prejudiced
when the district court relocated trial from San Antonio to Waco, which
disrupted their original litigation strategy and prevented them from cross-
examining Powell.
We disagree that the Lifetime Defendants were prejudiced by the
transfer of trial venue from San Antonio to Waco. On October 20, 2019—3.5
months before trial—the Lifetime Defendants were notified that trial would
take place in Waco. At no point during this period did the Lifetime
Defendants request leave to depose Powell a second time to conduct the
cross-examination they had originally reserved for trial. See FED. R. CIV. P.
30(a)(2)(A)(ii). Further, the Lifetime Defendants were notified of
Spectrum’s intent to introduce Powell’s deposition testimony on January 2,
2020—approximately one month before trial—and failed to timely object to
use of that testimony on Rule 32(a) grounds, thus waiving any such objection.
See W.D. TEX. CIV. R. 16(f). Nor is there anything in the record indicating
that the Lifetime Defendants sought to commit their cross-examination to a
deposition after Spectrum’s January 2 disclosure.
For the foregoing reasons, the district court did not abuse its
discretion in admitting Powell’s deposition testimony at trial, and we affirm
that decision. Curtis, 174 F.3d at 667.
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B. Statutory Damages Award
Under the ACPA, “the plaintiff may elect, at any time before final
judgment is rendered by the trial court, to recover, instead of actual damages
and profits, an award of statutory damages in the amount of not less than
$1,000 and not more than $100,000 per domain name, as the court considers
just.” 15 U.S.C. § 1117(d).
We apply legal standards derived from copyright law to our review of
a statutory damages award under the ACPA. 2 See E. & J. Gallo Winery v.
Spider Webs Ltd., 286 F.3d 270, 278 (5th Cir. 2002) (stating that ACPA’s
statutory damages provisions “are akin to the statutory damages provisions
of the copyright laws”); see also Kiva Kitchen & Bath Inc. v. Cap. Distrib. Inc.,
319 F. App’x 316, 320–21 (5th Cir. 2009). Copyright law affords district
courts broad discretion to impose damages awards within the bounds of
statutory damages provisions. Douglas v. Cunningham, 294 U.S. 207 (1935)
(finding that “the employment of the statutory yardstick, within set limits, is
committed solely to the court which hears the case”); Broad. Music, Inc. v.
Xanthas, Inc., 855 F.2d 233, 237 (5th Cir. 1988) (stating that district courts
have “wide discretion” under copyright law “to award anything” within
limits of statutory damages provision).
In an unpublished decision, we identified several factual
considerations relevant to our review of a statutory damages award under the
ACPA. Kiva, 319 F. App’x at 320–21. The plaintiff and defendants in Kiva
2
Compare 15 U.S.C. § 1117(d) with 17 U.S.C. § 504(c)(1) (“[T]he copyright owner
may elect, at any time before final judgment is rendered, to recover, instead of actual
damages and profits, an award of statutory damages for all infringements involved in the
action, with respect to any one work, for which any one infringer is liable individually, or
for which any two or more infringers are liable jointly and severally, in a sum of not less
than $750 or more than $30,000 as the court considers just.”).
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were competitors that sold home appliances in Dallas. Id. at 318. The plaintiff
sued the defendant company and its owner under the ACPA based, in part,
on the defendants’ registration of three internet domain names similar to the
trade names for the plaintiff’s Dallas store and for causing internet users
entering those domain names to be redirected to the defendants’ website. Id.After a jury found the defendants liable under the ACPA, the district court
imposed the maximum statutory damages award of $100,000 for each of the
three infringing domains. Id. at 320.
On appeal, we affirmed the award as “just” under § 1117(d) based on
the following facts: the parties directly competed to provide similar services
in Dallas, the defendants exhibited a bad-faith intent to divert the plaintiff’s
potential customers to their website, and the defendants refused to stop
forwarding the infringing domains or transfer them to the plaintiff until just
a few weeks before trial. Id. at 320–21. Kiva noted several other relevant
considerations for assessing a statutory damages award under the ACPA,
including willfulness and deliberateness of the infringer’s violation,
restitution of profit, reparation for injury, and discouraging wrongful
conduct. Id. at 320.
In this case, the $100,000 damages award for the Infringing Domain
satisfies the ACPA requirement that the amount of statutory damages be
“not more than $100,000 per domain name.” 15 U.S.C. § 1117(d). This
award falls within the district court’s broad discretion in applying § 1117(d).
Kiva, 319 F. App’x at 320. Further, the district court’s factual findings are
similar to those supporting the maximum statutory damages award in Kiva.
Spectrum and Lifetime directly compete to provide the same type of services
in San Antonio. In addition, the record confirms that the Lifetime
Defendants violated Spectrum’s trademarks willfully and in bad faith by
engaging in the following conduct: establishing Lifetime as Spectrum’s
competitor while Tuttle was under his non-compete agreement with
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Spectrum; registering the Infringing Domain with prior knowledge of
Spectrum’s trademarks; purchasing the Infringing Domain in the hopes of
eventually selling it to Spectrum for a profit; and setting up the Infringing
Domain to confuse and divert internet users who sought Spectrum’s
services. The Lifetime Defendants demonstrated further willfulness during
the underlying lawsuit by showing a disregard for their submission of
inconsistent, misleading, and inaccurate answers to written discovery.
Additionally, the Lifetime Defendants’ bad-faith conduct continued after
trial, when they blatantly copied text from Spectrum’s copyright-protected
web pages for use on Lifetime’s website. Finally, there is no record evidence
that the Lifetime Defendants offered to transfer the Infringing Domain to
Spectrum.
The Lifetime Defendants rely on two district court decisions from
California in support of their argument that the statutory damages award was
excessive. These decisions do not present the same set of factual findings
made by the district court in this case and do not provide any binding
precedent for reversal.
For these reasons, the district court did not clearly err in awarding
Spectrum $100,000 in statutory damages, which we affirm. Jauch, 470 F.3d
at 213.
C. Attorneys’ Fees
The Lanham Act provides that a “court in exceptional cases may
award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a).
To make an “exceptional case” showing, the prevailing party bears the
burden of demonstrating by clear and convincing evidence that the defendant
“maliciously, fraudulently, deliberately, or willfully infringes the plaintiff’s
mark.” Procter & Gamble Co. v. Amway Corp., 280 F.3d 519, 527 (5th Cir.
2002). The prevailing party must further demonstrate “a high degree of
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culpability on the part of the infringer,” such as bad faith. Texas Pig Stands,
Inc. v. Hard Rock Cafe Int’l, Inc., 951 F.2d 684, 697 (5th Cir. 1992). “We have
used ‘bad faith’ as a short-hand for conducting this inquiry, but we also have
instructed district courts to consider all the facts and circumstances to
determine whether a case is exceptional[.]” Procter & Gamble, 280 F.3d at
527 (internal citation omitted).
Additionally, an award of attorneys’ fees “may be warranted either
where the prevailing party stood out in terms of the strength of its litigating
position or where the non-prevailing party litigated the case in an
‘unreasonable manner.’” All. for Good Gov’t, 919 F.3d at 295 (quoting Octane
Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014)).
As discussed above, the record of this case confirms that the Lifetime
Defendants engaged in willful, bad-faith infringement of Spectrum’s
trademarks, justifying an award of maximum statutory damages. The
overwhelming evidence against the Lifetime Defendants illustrates the sheer
strength of Spectrum’s litigation position. Moreover, the Lifetime
Defendants’ disregard for their submission of inconsistent, misleading, and
inaccurate answers to written discovery—including not admitting Spectrum
was a competitor, failing to identify the clients they obtained from Spectrum,
and misrepresenting that they had conducted a diligent search of the number
of times the Infringing Domain was accessed—demonstrates that they
litigated this case in an unreasonable manner.
In declining to award attorneys’ fees, the district court noted that the
Lifetime Defendants’ actions were certainly willful, but they did not rise to
the level of the egregious conduct exemplified in cases like Kiva. In Kiva, the
district court awarded attorneys’ fees to the plaintiff, finding that the case
was “exceptional” based on the defendants’ bad-faith intent to use multiple
infringing internet domains to divert the plaintiff’s potential customers to the
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defendants’ website. Kiva, 319 F. App’x at 321. We affirmed that award on
appeal. Id. at 322.
We disagree with the district court that the facts of this case are less
egregious than Kiva. Like the defendants in Kiva, the Lifetime Defendants
acted in bad faith by registering and using an infringing internet domain with
the intent to divert a direct competitor’s potential customers to Lifetime’s
website. Further, the facts of this case are even more egregious than Kiva,
because the Lifetime Defendants never offered to transfer the Infringing
Domain to Spectrum, whereas the Kiva defendants made such an offer to the
plaintiff shortly before trial. Finally, the Lifetime Defendants engaged in
post-trial misconduct by blatantly copying text from Spectrum’s website—
evidence of willfulness and bad faith that was not present in Kiva.
For these reasons, we find that this case is exceptional and that the
district court abused its discretion in declining to award Spectrum attorneys’
fees. All. for Good Gov’t, 919 F.3d at 295. We reverse this finding and remand
to the district court for a determination of reasonable attorneys’ fees. 15
U.S.C. § 1117(a).
IV.
For the foregoing reasons, we (1) AFFIRM the district court’s
admission of Spencer Powell’s deposition testimony at trial; (2) AFFIRM
the district court’s statutory damages award; and (3) REVERSE the district
court’s finding that Spectrum was not entitled to attorneys’ fees and
REMAND for a determination of reasonable attorneys’ fees.
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