Quincy Bioscience, LLC v. Ellishbooks ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19-1799
QUINCY BIOSCIENCE, LLC,
Plaintiff-Appellee,
v.
ELLISHBOOKS, et al.,
Defendants-Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:17-cv-08292 — Sharon Johnson Coleman, Judge.
____________________
DECIDED JUNE 5, 2020
____________________
Before WOOD, Chief Judge, and FLAUM and RIPPLE, Circuit
Judges.
PER CURIAM. On April 24, 2020, we issued an opinion af-
firming the judgment in favor of the appellee, Quincy Bio-
science, LLC (“Quincy”). See Quincy Bioscience, LLC v. Ellish-
books, 957 F.3d 725, 726 (7th Cir. 2020). Quincy now seeks an
award of sanctions under Federal Rule of Appellate Proce-
dure 38. For the reasons stated below, the motion is granted.
2 No. 19-1799
Quincy brought this action against Ellishbooks and relat-
ed individuals and entities (collectively “Ellishbooks”), al-
leging violations of the Lanham Act, 15 U.S.C. §§ 1114, 1125,
and various state laws. Specifically, Quincy alleged that El-
lishbooks engaged in the unauthorized and unlawful sale of
Quincy’s dietary supplements bearing the Prevagen®
trademark, some of which had been stolen from retail out-
lets. Ellishbooks did not respond to the complaint, and the
district court entered a default.
Quincy then moved for entry of default judgment. El-
lishbooks opposed the motion on two grounds: (1) that it
had not been served properly with the summons and com-
plaint; and (2) that the products it had sold were distinct
from those sold by Quincy. The district court rejected these
arguments. It detailed the many ways in which Quincy had
attempted to effectuate personal service, and observed that
Ellishbooks had “deliberately … sought to evade service.”1
The district court concluded that service on Ellishbooks’s
registered agent was legally adequate and that it had per-
sonal jurisdiction over Ellishbooks. The court further ob-
served that Ellishbooks had neither established good cause
for its default nor identified a potentially meritorious de-
fense. Accordingly, the district court entered a default judg-
ment in favor of Quincy.
The district court then scheduled a prove-up hearing to
determine the amount of Quincy’s damages. Ellishbooks re-
tained new counsel to represent it at the prove-up hearing.
Before the hearing, Quincy submitted documents establish-
ing that Ellishbooks had received $480,968.13 from selling
1 R.28 at 3.
No. 19-1799 3
Prevagen® brand products. At the prove-up hearing, Ellish-
books’s counsel argued against the award of damages, but
did not counter Quincy’s evidence. The district court ulti-
mately awarded Quincy $480,968.13 plus costs. The court’s
order did not address Quincy’s request for a permanent in-
junction, however, and Quincy moved to amend the judg-
ment to include injunctive relief. The court held a hearing on
the motion, but counsel for Ellishbooks did not appear. The
court granted Quincy’s motion and permanently enjoined
Ellishbooks from infringing on Quincy’s trademark and sell-
ing stolen products bearing the Prevagen® mark.
On appeal, Ellishbooks challenged the district court’s
judgment on several grounds. Ellishbooks argued that the
district court failed to make “factual findings on decisive is-
sues” as required by Federal Rule of Civil Procedure 52(a).2
It further argued that the district court clearly erred in find-
ing that Ellishbooks knew or had reason to know that some
portion of the Prevagen® products it sold were stolen. Final-
ly, it relatedly argued that the district court erred in entering
a permanent injunction without requiring Quincy to estab-
lish that Ellishbooks knew that some of the Prevagen®
products were stolen.
We concluded that Ellishbooks’s arguments “have been
waived and, in any event, are meritless,” and “require lim-
ited discussion.” Quincy Bioscience, LLC, 957 F.3d at 726, 729.
Because of the default, the well-pleaded allegations of the
complaint relating to liability were taken as true, including
Quincy’s allegation that Ellishbooks had reason to know that
the Prevagen® products it sold had been stolen from retail
2 Appellants’ Br. 5.
4 No. 19-1799
outlets. We deemed Ellishbooks’s remaining two arguments
to be waived because they had not been made in the district
court. We therefore affirmed the district court’s judgment in
all respects.
In its motion for sanctions, Quincy now submits that
such an award is warranted because Ellishbooks’s appellate
arguments were destined to fail. Rule 38 permits the court to
award “just damages and single or double costs to the appel-
lee” when an appellant files a frivolous appeal. Fed. R. App.
38. “An appeal is frivolous if the appellant’s claims are cur-
sory, totally undeveloped, or reassert a previously rejected
version of the facts.” McCurry v. Kenco Logistics Servs., LLC,
942 F.3d 783, 791 (7th Cir. 2019). “An appeal is also frivolous
if it presents arguments that are so insubstantial that they
are guaranteed to lose.” Id. Even when an appeal is frivo-
lous, whether to impose sanctions under Rule 38 is a discre-
tionary determination. Dolin v. GlaxoSmithKline LLC, 951
F.3d 882, 888 (7th Cir. 2020) (“When an appeal is frivolous,
Rule 38 sanctions are not mandatory but are left to the sound
discretion of the court of appeals to decide whether sanc-
tions are appropriate.” (quoting Harris N.A. v. Hershey, 711
F.3d 794, 802 (7th Cir. 2013))).
Ellishbooks, represented by new counsel, filed a response
to Quincy’s motion. It suggests that attorneys’ fees are not
authorized by Rule 38. This position is incorrect. See, e.g., Ja-
worski v. Master Hand Contractors, Inc., 882 F.3d 686, 692 (7th
Cir. 2018) (ordering appellant to pay appellees’ costs and at-
torneys’ fees incurred in the appeal under Rule 38); Cooney v.
Casady, 735 F.3d 514, 524 (7th Cir. 2013) (ordering appellant
to show cause why it should not be required “under Rule 38
of the Federal Rules of Appellate Procedure to pay the de-
No. 19-1799 5
fendants’ costs and reasonable attorneys’ fees on appeal”).
Ellishbooks appears to confuse the issue of sanctions under
Rule 38 with taxable costs under Federal Rule of Appellate
Procedure 39 and 28 U.S.C. § 1920, which is a separate mat-
ter. Ellishbooks also submits that it has not acted in bad faith
at any point during this litigation. It states that its lead coun-
sel “has been admitted to practice in the District of Columbia
for a substantial period of time, but the nature of his princi-
pally intellectual property and patent prosecution practice
has caused him never to have previously prosecuted or de-
fended any appeal in any United States Court of Appeals
prior to the instant appeal.”3
An award of sanctions is warranted in this case. Ellish-
books’s appellate arguments had virtually no likelihood of
success. Well-settled principles governing the effect of a de-
fault and waiver of arguments not raised in the district court
were controlling. See, e.g., H.A.L. NY Holdings, LLC v. Guinan,
958 F.3d 627, 630 (7th Cir. 2020) (concluding that Rule 38
sanctions were warranted because the appeal lacked “a rea-
sonable and good-faith basis”); Weinhaus v. Cohen, 773 F.
App’x 314, 317 (7th Cir. 2019), cert. denied sub nom. Weinhaus
v. Illinois, 140 S. Ct. 1116 (2020) (granting motion for sanc-
tions where appellant’s arguments “ignore[d] our case law
and the arguments raised by the [appellees]”).
Ellishbooks’s conduct during the course of the appeal is
also relevant. Early in the case, we ordered Ellishbooks to
file a complete jurisdictional statement, but counsel failed to
respond, requiring the court to issue a show cause order.
This issue was ultimately resolved, but then counsel filed a
3 Resp. to Mot. for Sanctions 5.
6 No. 19-1799
confusing motion to dismiss, suggesting that the parties’
dispute was “moot.” We directed counsel to file a supple-
ment to the motion clarifying whether Ellishbooks was mov-
ing for voluntary dismissal of the appeal under Federal Rule
of Appellate Procedure 42(b), but counsel again did not re-
spond. Ellishbooks also failed to submit a timely brief, re-
quiring the court to issue another show cause order. A brief
was later filed with several significant deficiencies, including
the lack of both the certification required by Seventh Circuit
Rule 30(d) and a table of contents. Ellishbooks ultimately
submitted a brief that was accepted for filing, but the argu-
ment section was a mere five pages long, and as we have
noted previously, consisted of meritless contentions. Ellish-
books did not submit a reply brief addressing Quincy’s ar-
guments, and counsel later sought to delay oral argument—
a request that the we denied.
These shortcomings cannot be attributed entirely to
counsel’s lack of experience in litigating federal appeals. A
review of the dockets of this court and of the district court
suggests that Ellishbooks has attempted to draw out the pro-
ceedings as long as possible while knowing that it had no
viable substantive defense. See In re Lisse, 921 F.3d 629, 644
(7th Cir. 2019) (“Sanctions are warranted under Rule 38
when a litigant or attorney presents appellate arguments
with no reasonable expectation of success for the purposes of
delay, harassment, or sheer obstinacy.” (quoting In re Nora,
778 F.3d 662, 665 (7th Cir. 2015))).
For these reasons, Quincy’s motion for sanctions is
GRANTED. Within fourteen days of this opinion, Quincy
shall submit a statement of its costs and fees incurred in this
No. 19-1799 7
appeal. Ellishbooks shall have fourteen days thereafter to
raise any objections to the amounts claimed.