LHO Chicago River, L.L.C. v. Rosemoor Suites, LLC ( 2021 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 20-2506
LHO CHICAGO RIVER, L.L.C.,
Plaintiff-Appellee,
v.
ROSEMOOR SUITES, LLC, PORTFOLIO HOTELS
& RESORTS, LLC, and CHICAGO HOTEL, LLC,
Defendants-Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16 C 6863 — Charles P. Kocoras, Judge.
____________________
ARGUED FEBRUARY 10, 2021 — DECIDED FEBRUARY 19, 2021
____________________
Before MANION, KANNE, and ROVNER, Circuit Judges.
KANNE, Circuit Judge. Chicago is home to two hotels
named “Hotel Chicago.” Some years ago, the operator of one
Hotel Chicago—LHO Chicago River, L.L.C. (“LHO”)—sued
the operators of the other Hotel Chicago—Rosemoor Suites,
LLC, and associated entities (“Rosemoor”)—for trademark
infringement and related claims. LHO dropped its case in
February 2018, but a dispute over attorney fees rages on.
2 No. 20-2506
The district court denied Rosemoor’s first request for fees
in 2018. Rosemoor appealed, and we remanded with instruc-
tions for the district court to apply the standard announced
by the Supreme Court in Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 572 U.S. 545 (2014). On remand, the district court
denied Rosemoor’s renewed request for fees, and Rosemoor
appealed again. We now consider whether the district court
erred in denying Rosemoor’s fee request a second time.
We conclude that it did not. The district court heeded our
instruction to apply the Octane Fitness standard and reasona-
bly exercised its discretion in weighing the evidence before it.
We therefore affirm the district court’s denial of Rosemoor’s
renewed motion for attorney fees.
I. BACKGROUND1
LHO owns a hotel in downtown Chicago that it rebranded
as “Hotel Chicago” in 2014. Two years later, Rosemoor re-
named its existing hotel, in the west side of the city, as “Hotel
Chicago.” 2 In June 2016, LHO sued Rosemoor for trademark
infringement and unfair competition under the Lanham Act
1 We note that Rosemoor’s so-called Statement of the Case is really
just ten pages of argument. This does not comply with Federal Rule of
Appellate Procedure 28, which requires “a concise statement of the case”
that “set[s] out the facts relevant to the issues submitted for review, de-
scrib[es] the relevant procedural history, and identif[ies] the rulings pre-
sented for review, with appropriate references to the record.” “Argument
is not allowed in a brief’s recap of a case’s procedure or facts.” United States
v. Blagojevich, 612 F.3d 558, 560 (7th Cir. 2010).
2 The “Hotel Chicago” owned by LHO is located downtown in the
River North area of Chicago at 333 N. Dearborn Street. The “Hotel Chi-
cago” owned by Rosemoor is located over three miles away in Chicago’s
West Loop area at 1622 W. Jackson Boulevard.
No. 20-2506 3
and for deceptive advertising and common-law trademark vi-
olations under Illinois law. LHO also moved for a preliminary
injunction based on its trademark infringement claim.
The motion for a preliminary injunction was referred to
Magistrate Judge Susan E. Cox, who recommended that the
court grant the motion because LHO showed a likelihood of
success on the merits. Among other things, Magistrate Judge
Cox concluded: (1) that LHO was “very likely to prove that it
has priority over [Rosemoor] regarding the relevant trade-
mark”; (2) that, because LHO’s trademark probably has “sec-
ondary meaning”—which means that “most consumers think
of the term as the name of the product instead of as descrip-
tive of the product,” SportFuel, Inc. v. PepsiCo, Inc., 932 F.3d
589, 599 (7th Cir. 2019) (first citing Sorensen v. WD-40 Co., 792
F.3d 712, 723 (7th Cir. 2015); and then citing Packman v. Chi.
Tribune Co., 267 F.3d 628, 639 (7th Cir. 2001))—it was “ex-
tremely unlikely that [Rosemoor] will prove that LHO’s
trademark is generic”; and (3) that LHO had “a strong chance
of proving that there is a likelihood of confusion between the
two hotels.”
Rosemoor objected to the report and recommendation,
and District Judge Charles P. Kocoras held an evidentiary
hearing to resolve the objection. In February 2017, Judge
Kocoras denied preliminary injunctive relief. He agreed with
Magistrate Judge Cox in all but one of her conclusions: that
the “Hotel Chicago” mark was likely to have acquired second-
ary meaning. Rather, Judge Kocoras found that “LHO has
failed, at this juncture, to show that it is likely to succeed in
proving secondary meaning”—and therefore was unlikely to
show that “Hotel Chicago” was a protectable trademark.
4 No. 20-2506
LHO initially appealed the district court’s decision but
moved to voluntarily dismiss its claims with prejudice before
briefing. The district court granted LHO’s motion and entered
judgment for Rosemoor in February 2018.
Three months later, Rosemoor requested more than
$500,000 in attorney fees, arguing that fees were warranted
under the Lanham Act because this case qualifies as “excep-
tional.” Judge Kocoras denied the request in April 2019 under
the “abuse-of-process” standard from Burford v. Accounting
Practice Sales, Inc., 786 F.3d 582 (7th Cir. 2015). Rosemoor ap-
pealed that decision and argued that the district court should
have applied the test announced in Octane Fitness, 572 U.S.
545, to determine whether the case was exceptional.
We agreed that the district court should have evaluated
Rosemoor’s attorney-fee request under Octane Fitness and “in-
struct[ed] district courts analyzing such requests to examine
the ‘totality of the circumstances’ and exercise their ‘equitable
discretion’ in light of the factors and considerations identified
in Octane [Fitness].” LHO Chi. River, L.L.C. v. Perillo, 942 F.3d
384, 388–89 (7th Cir. 2019) (“LHO I”) (quoting Octane Fitness,
572 U.S. at 554). We thus remanded the case for that purpose.
In February 2020, Rosemoor filed a renewed request for
more than $630,000 in fees. It argued that, considering the
weakness of LHO’s position on the merits, LHO’s motives in
bringing suit, and its conduct in discovery, this case was ex-
ceptional under Octane Fitness. In July 2020, Judge Kocoras
denied the renewed request after finding that Rosemoor had
not met its burden under Octane Fitness. Rosemoor appealed.
No. 20-2506 5
II. ANALYSIS
The Lanham Act provides that “[t]he court in exceptional
cases may award reasonable attorney fees to the prevailing
party.” 15 U.S.C. § 1117(a). In Octane Fitness, the Supreme
Court addressed an identical provision of the Patent Act, 35
U.S.C. § 285, and held that:
[A]n “exceptional” case is simply one that stands out
from others with respect to [1] the substantive
strength of a party’s litigating position (considering
both the governing law and the facts of the case) or
[2] the unreasonable manner in which the case was
litigated. District courts may determine whether a
case is “exceptional” in the case-by-case exercise of
their discretion, considering the totality of the cir-
cumstances.
572 U.S. at 554.
Five years later—in this case—we abandoned Burford’s
abuse-of-process test and confirmed that the Octane Fitness
“standard should apply in the present context of the Lanham
Act.” LHO I, 942 F.3d at 387. We also reiterated what sorts of
considerations can inform this analysis: “frivolousness, moti-
vation, objective unreasonableness (both in the factual and le-
gal components of the case) and the need in particular circum-
stances to advance considerations of compensation and deter-
rence.” Id. at 386 (quoting Octane Fitness, 572 U.S. at 554 n.6).
A. Proper Standard of Review Under Octane Fitness
In the previous appeal, “[t]o guard against future confu-
sion,” we made clear that our review of a district court’s deci-
sion to deny attorney fees under the Lanham Act “is one of
abuse of discretion.” Id. at 386 n.3; accord BASF Corp. v. Old
6 No. 20-2506
World Trading Co., 41 F.3d 1081, 1099 (7th Cir. 1994) (“A deci-
sion to award attorneys’ fees under the Lanham Act is firmly
committed to the district court’s discretion … .”).
But despite our clarity in this very case, Rosemoor remains
confused. Rosemoor presses for de novo review on the ground
that the district court did not, in fact, apply Octane Fitness on
remand. Rather, Rosemoor brazenly contends that the experi-
enced district judge fell back into old habits by applying Bur-
ford’s now-defunct abuse-of-process test.
That argument is specious. Any question about whether
the district court applied Burford instead of Octane Fitness is
answered by a flip through its memorandum opinion, which
cites our abandonment of the abuse-of-process standard;
thoroughly articulates the framework announced in Octane
Fitness; and structures its analysis around the two prongs of
the Octane Fitness standard: “I. Substantive Strength of Litiga-
tion Position” and “II. Unreasonable Manner of Litigation.”
To argue otherwise, Rosemoor primarily relies on the dis-
trict court’s treatment of what Rosemoor calls a “damming
[sic] email” that was sent by LHO’s vice president in 2013,
three years before this case was filed. That email states, in
part: “As you know, because we cannot trademark the name
Hotel Chicago, our best protection is to start using it to build
name equity.” The district court concluded that “this evi-
dence does not foreclose the possibility that LHO had a good-
faith belief that it acquired secondary meaning for the mark in
the time since the email” was sent. Rosemoor claims that this
statement reveals that the district court (1) erroneously ap-
plied a “foreclose the possibility” evidentiary standard, rather
than the proper “preponderance of the evidence” standard,
No. 20-2506 7
and (2) erroneously applied a “bad faith” standard, which Oc-
tane Fitness rejected.
These arguments are without merit. The district court
twice stated that Rosemoor had to “prove that this case is ex-
ceptional by a preponderance of the evidence,” and it deter-
mined that that one email was simply not as “damming” as
Rosemoor claims.3 As the court explained, the email “does not
directly show the motivations of LHO management at the
time the suit was brought because [it] was from years before
the litigation was commenced.”
And the court did not apply a bad-faith standard, either.
It did not require Rosemoor to prove that LHO acted in bad
faith, but considered whether LHO had an “improper mo-
tive,” whether the suit was “brought for an improper pur-
pose,” whether there was “litigation misconduct,” whether
LHO “was unreasonable in negotiations,” and whether any of
LHO’s conduct was “so egregious and reprehensible as to
make the case ‘stand out’ from others and merit fee-shifting.”
This was a proper application of our and the Supreme Court’s
instructions that courts consider “the … manner in which the
case was litigated.” Octane Fitness, 572 U.S. at 554.
3 We note that there is some question about whether “preponderance
of the evidence” is even the right evidentiary standard under Octane Fit-
ness, which is not especially clear on that point. 572 U.S. at 557–58 (“Sec-
tion 285 demands a simple discretionary inquiry; it imposes no specific
evidentiary burden, much less such a high one. Indeed, patent-infringe-
ment litigation has always been governed by a preponderance of the evi-
dence standard, and that is the ‘standard generally applicable in civil ac-
tions’ … .” (citation omitted) (quoting Herman & MacLean v. Huddleston,
459 U.S. 375, 390 (1983))). No party here argues that a different standard
applies, however, so we have no reason to reach the issue.
8 No. 20-2506
Naturally, part of that inquiry is whether a party acted in
bad faith. Octane Fitness makes clear that “a case presenting
either subjective bad faith or exceptionally meritless claims may
sufficiently set itself apart from mine-run cases to warrant a
fee award.” 572 U.S. at 555 (emphasis added) (citing Noxell
Corp. v. Firehouse No. 1 Bar-B-Que Rest., 771 F.2d 521, 526 (D.C.
Cir. 1985)). So bad faith remains relevant even if it’s not re-
quired. See also LHO I, 942 F.3d at 386 (explaining that “moti-
vation” is a relevant factor). A district court’s reference to a
party’s good or bad faith therefore does not show that the
court ignored Octane Fitness. To the contrary, where the court
treats bad faith as a factor rather than a requirement (as the
district court did here), it shows just the opposite.
And so we end up where we started: we review the district
court’s decision for an abuse of discretion. We thus “will not
disturb the district court’s finding ‘if it has a basis in reason.’”
Holmstrom v. Metro. Life Ins. Co., 615 F.3d 758, 779 (7th Cir.
2010) (quoting Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574,
592 (7th Cir. 2000)). What matters is not what we might have
decided if we were sitting in the district judge’s shoes, but
“whether any reasonable person could agree with the district
court.” Deitchman v. E.R. Squibb & Sons, Inc., 740 F.2d 556, 563
(7th Cir. 1984). To reverse, we must find an erroneous conclu-
sion of law, a record that contains no evidence rationally sup-
porting the court’s decision, or facts that are clearly erroneous
as the district court found them. Id. at 564. This is a deferential
standard; “[w]hen a district court exercises its discretion to
deny fees as a result of its subjectively superior understand-
ing of the litigation, we routinely affirm the decision of the
district court.” Jaffee v. Redmond, 142 F.3d 409, 412 (7th Cir.
1998).
No. 20-2506 9
The question now becomes whether Rosemoor gives us
cause to depart from that routine here.
B. Application of Octane Fitness
To recap, a case can be “exceptional” if the court deter-
mines, under the totality of the circumstances, that it “stands
out from others with respect to [1] the substantive strength of
a party’s litigating position (considering both the governing
law and the facts of the case) or [2] the unreasonable manner
in which the case was litigated.” Octane Fitness, 572 U.S. at 554.
We analyze these two considerations in turn.
1. Strength of LHO’s Litigating Position
The court need not consider any inflexible set of elements
to determine whether the factual or legal weaknesses of a
party’s litigating position make a case exceptional. Relevant
considerations at least include “frivolousness” and “objective
unreasonableness.” LHO I, 942 F.3d at 386 (quoting Octane Fit-
ness, 572 U.S. at 554). With these factors in mind, we conclude
that the district court did not abuse its discretion in finding
that LHO’s litigating position was not exceptionally weak be-
cause there was ample evidence to support that conclusion.
To start, the magistrate judge determined that LHO was
likely to succeed on the merits of its claims and recommended
granting its motion for a preliminary injunction. True, the dis-
trict judge ultimately disagreed, but we think the mere fact
that two experienced judges disagreed on the same motion is
“significant evidence that the pleading was not frivolous or
unreasonable.” Indianapolis Colts v. Mayor & City Counsel of
Baltimore, 775 F.2d 177, 182 (7th Cir. 1985); see Sanchez v. City
of Santa Ana, 936 F.2d 1027, 1041 (9th Cir. 1990) (“Logic and
10 No. 20-2506
fairness dictate that where two judges disagree, attorney’s
fees should not be awarded … for bringing a frivolous case.”).
Second, Rosemoor itself filed two intent-to-use applica-
tions for the “Hotel Chicago” mark. This undermines
Rosemoor’s contentions that that mark was plainly unworthy
of protection and that LHO’s claim to a protectable mark in
that name was frivolous.
Third, LHO provided evidence of actual confusion from
seventeen customers, and Rosemoor admitted that confused
travelers have called its hotel thinking they were talking to
someone at LHO’s hotel. “[T]here can be no more positive or
substantial proof of the likelihood of confusion than proof of
actual confusion,” and “while very little proof of actual con-
fusion would be necessary to prove the likelihood of confu-
sion, an almost overwhelming amount of proof would be nec-
essary to refute such proof.” Int’l Kennel Club of Chi., Inc. v.
Mighty Star, Inc., 846 F.2d 1079, 1089 (7th Cir. 1988) (quoting
World Carpets, Inc. v. Dick Littrells New World Carpets, 438 F.2d
482, 489 (5th Cir. 1971)).
Fourth, both the magistrate and district judges found that
LHO “provided evidence of significant, widespread market-
ing efforts, global promotion, and sales volume to demon-
strate the mark had acquired secondary meaning.”
And fifth, a party who fails to obtain preliminary injunc-
tive relief may yet succeed on the merits because “[a] prelim-
inary injunction is an extraordinary remedy.” Winter v. Nat.
Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). The district court
recognized as much even while denying preliminary injunc-
tive relief: “It may be that after a full trial the record will sup-
port LHO’s claim.” So the denial of LHO’s request for a
No. 20-2506 11
preliminary injunction is not particularly strong evidence that
its case was exceptionally weak.
Despite this evidence, Rosemoor argues that the district
court got its conclusion wrong to the point that it abused its
discretion. These arguments are unpersuasive.
Rosemoor argues that this litigation is exactly like Plati-
num Home Mortgage Corp. v. Platinum Financial Group, Inc., 149
F.3d 722 (7th Cir. 1998), in which we affirmed the district
court’s finding that the plaintiff failed to establish secondary
meaning for its descriptive mark. Rosemoor contends that, in
light of Platinum, it is “impossible to conceive of a weaker
case” than LHO’s. Indeed, Rosemoor goes so far as to argue
that LHO could be subject to Rule 11 sanctions for simply fil-
ing this lawsuit (though, if that’s the case, one wonders why
Rosemoor never bothered seeking such sanctions).
It’s true that the state of “the governing law” can inform
whether a case is exceptional. Octane Fitness, 572 U.S. at 554.
But Rosemoor puts too much stock in Platinum. That a single
oldish case disfavored a claim similar to LHO’s does not make
LHO’s case “stand out” from others. Precedent is distin-
guished and departed from all the time (and we’ve even been
known to overrule a case now and then!). It is a rare plaintiff
who has no “bad law” to contend with, and the presence of
one “bad case” does not turn an ordinary uphill battle into
Pickett’s Charge. That’s especially true when the issue is
whether a descriptive mark has acquired secondary meaning,
a question of fact that rests on “several factors” to be analyzed
on a case-by-case basis. See Platinum, 149 F.3d at 728.
Rosemoor’s other arguments are equally unavailing.
12 No. 20-2506
(1) Rosemoor focuses on LHO’s lack of consumer surveys
supporting its claim. But the lack of consumer surveys is “not
fatal.” Id. Nor is it “feasible to require a Lanham Act plaintiff
to conduct full-blown consumer surveys in the truncated
timeframe between filing suit and seeking a preliminary in-
junction.” Eli Lilly & Co. v. Arla Foods, Inc., 893 F.3d 375, 382
(7th Cir. 2018).
(2) Rosemoor emphasizes that LHO lacked a registered
trademark for “Hotel Chicago” and thus was not entitled to
the presumptions of ownership, validity, and enforceability.
But those are presumptions; there is no rule that claims based
on unregistered trademarks are frivolous per se. See Johnny
Blastoff, Inc. v. L.A. Rams Football Co., 188 F.3d 427, 435 (7th Cir.
1999) (“Infringement of unregistered marks is actionable un-
der the Lanham Act.”).
(3) Rosemoor argues that it formed an entity called “Chi-
cago Hotel, LLC.” But “Chicago Hotel, LLC” is not “Hotel
Chicago,” a mark over which the district court found that
LHO likely had priority. And as the district court explained,
that Chicago Hotel, LLC, registered “Hotel Chicago” as a dba
merely shows an intent to use the mark, not rights to it. See
Zazu Designs v. L’Oreal, S.A., 979 F.2d 499, 504 (7th Cir. 1992).
(4) Rosemoor argues that LHO’s past registration of other
trademarks “is evidence (meeting the preponderance of the
evidence standard) that [LHO], by not filing for trademark
protection [for the “Hotel Chicago” mark], knew protection
was not available.” Rosemoor cites no support for this asser-
tion—which, in any event, is undermined by its own, more
recent applications for the same mark.
No. 20-2506 13
(5) Rosemoor argues that when the district court ad-
dressed its request for fees, the court “ignored” its own words
from the preliminary-injunction stage, where it had stated
that LHO’s effort to prove secondary meaning was “an uphill
battle” for which LHO “has yet to enlist.” We think the court
was just stating the obvious: that it’s difficult to prove second-
ary meaning at the preliminary injunction stage, before all the
evidence is marshaled. We doubt that the court was portend-
ing that LHO’s case was exceptional, then changed its mind.
We conclude that the district court acted within its discre-
tion in weighing these facts and finding that LHO’s litigating
position was not so weak as to warrant fee shifting.
2. LHO’s Litigation Conduct
Rosemoor also argues that this case is exceptional because
of “the unreasonable manner in which the case was litigated.”
Octane Fitness, 572 U.S. at 554. Here, we consider factors such
as LHO’s “motivation” and “the need in particular circum-
stances to advance considerations of compensation and deter-
rence.” LHO I, 942 F.3d at 386. The district court found that
LHO’s litigation conduct did not justify fee shifting. We agree.
Rosemoor advances scattershot arguments, all of which
were reasonably rejected by the district court. Rosemoor
again points to the 2013 email to show that LHO knew that its
case was bunk from the beginning. The district court rejected
this argument because it found that the evidence of LHO’s
marketing budget and advertising efforts, plus the passage of
time between the email and the filing of the complaint,
showed that LHO reasonably believed it had developed pro-
tectible trademark rights. That was not an abuse of discretion.
14 No. 20-2506
Rosemoor also complains that LHO offered no evidence of
its own to show that it had conducted sufficient pre-filing in-
vestigation. Rosemoor forgets that LHO bore no evidentiary
burden on Rosemoor’s request for attorney fees. It was up to
Rosemoor to prove that LHO engaged in exceptional litiga-
tion misconduct, and its evidence failed to persuade the dis-
trict court. LHO’s strategic decision to tear down Rosemoor’s
evidence rather than pile up its own does not make the district
court’s decision an abuse of discretion.
Finally, Rosemoor claims four examples of LHO’s unrea-
sonable conduct in litigation: (1) LHO’s improper naming of
Joseph Perillo as a defendant (Perillo was later dropped);
(2) its conduct in discovery; (3) its initial appeal from the de-
nial of the preliminary injunction, and (4) its refusal to grant
Rosemoor a covenant not to sue.
The district court specifically considered and rejected each
one of these arguments (despite Rosemoor’s contention that
the court “glossed over” them). The court determined that
(1) “LHO show[ed] that it had reason to believe that Perillo
may have been involved”; (2) “[w]hile [some of LHO’s] ac-
tions [in discovery] were certainly bad, we do not believe they
are so egregious and reprehensible to make the case ‘stand
out’ from others and merit fee-shifting”; (3) “LHO was enti-
tled to appeal the denial of the preliminary injunction as a
matter of right”; and (4) “the evidence does not show litiga-
tion misconduct by LHO with respect to the covenant-not-to-
sue.” Rosemoor disagrees with how the district court
weighed the evidence, but discretion to weigh the evidence
within the bounds of reason is exactly what a totality-of-the-
circumstances test entails. We see no abuse of discretion in the
district court’s disposal of these arguments.
No. 20-2506 15
We therefore conclude that the district court did not abuse
its discretion in finding that LHO’s litigation conduct did not
rise to the level necessary to make this case exceptional.
III. CONCLUSION
Perhaps there is a reasonable way to weigh the facts in
Rosemoor’s favor. Perhaps there’s not. We only need to decide
if any reasonable person could agree with the district court’s
conclusion. We think most would. The district court consid-
ered the evidence under the Octane Fitness framework and
reasonably determined that this case did not qualify as excep-
tional. It thus did not abuse its discretion in denying
Rosemoor’s renewed request for attorney fees. We AFFIRM.