Employers Council on Flexible v. Kenneth Feltman, No. 09-2085 (4th Cir. 2010)

Annotate this Case

Download PDF

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-2085 EMPLOYERS COUNCIL ON FLEXIBLE COMPENSATION, Plaintiff Appellee, v. KENNETH FELTMAN; ANTHONY W. FLEXIBLE COMPENSATION, LTD., HAWKS; EMPLOYERS COUNCIL ON Defendants Appellants. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. James C. Cacheris, Senior District Judge. (1:08-cv-00371-JCC-TRJ) Argued: May 12, 2010 Decided: June 21, 2010 Before WILKINSON and KING, Circuit Judges, and HAMILTON, Senior Circuit Judge. Affirmed by unpublished per curiam opinion. ARGUED: Edward A. Pennington, HANIFY & KING, Washington, D.C., for Appellants. Bernard Joseph DiMuro, DIMUROGINSBERG, PC, Alexandria, Virginia, for Appellee. ON BRIEF: Anthony W. Hawks, HAWKS LAW OFFICE, Bethany Beach, Delaware, for Appellants. Unpublished opinions are not binding precedent in this circuit. PER CURIAM: In 2008, the Employers Council on Flexible Compensation ( ECFC ) instituted this civil action in the Eastern District of Virginia against Kenneth Feltman, Anthony W. Hawks, and the Employers Council on Flexible Compensation, Ltd. (collectively, the defendants ), cybersquatting. alleging trademark infringement and Shortly thereafter, the parties entered into a Permanent Injunction Order (the Consent Order ), agreeing that certain of ECFC s marks were protected under the Lanham Act and the Anticybersquatting Deeming the Consent Consumer Order a Protection concession Act of (the liability ACPA ). on the trademark infringement and cybersquatting claims, the district court awarded ECFC attorney fees under statutory damages pursuant to the ACPA. the Lanham Act and See Flexible Benefits Council v. Feltman, No. 1:08-cv-371 (E.D. Va. May 14, 2009) (the Damages Opinion ). 1 The defendants have appealed, primarily contending they did not admit liability in the Consent Order and, in any event, that attorney fees and statutory damages were not warranted. As explained below, we affirm. 1 The Damages Opinion is found at J.A. 1328 58. (Citations herein to J.A. ___ refer to the Joint Appendix filed by the parties in this appeal.) 2 I. ECFC a nonprofit lobbying organization dedicated to the maintenance and expansion of private employee benefit programs was incorporated in 1981 in the District of Columbia under the name Employers Council on Flexible Compensation. and 2008, ECFC continuously and exclusively Between 1981 used Employers Council on Flexible Compensation as its legal and trade name. The organization also used the acronym ecfc, as well as an ecfc logo, to further designate its products and services. For example, in 1999, ECFC registered the domain name ecfc.org, at which it maintained a website promoting flexible benefit compensation programs. In 1996, ECFC encountered severe financial problems, which threatened the organization with bankruptcy. Defendant Kenneth Feltman, who was then ECFC s executive director, was asked to create a separate management company that could assume ECFC s day-to-day operations indebtedness. and Accordingly, minimize Feltman the incorporated organization s Radnor, Inc. ( Radnor ), a political consulting firm specializing in, inter alia, management services. Radnor entered ( MSAs ), (including ECFC. under into separate which Feltman) In 1997, 2003, and 2005, ECFC and and management agreed Radnor to service hire exercise to management agreements ECFC s staff services for Thus, although Feltman was technically no longer an ECFC 3 employee after the 1997 MSA, he continued to play a significant role in its management. In 2007, ECFC s relationship with Radnor soured, prompting ECFC to terminate initiated District an of the 2005 arbitration Columbia, MSA. In proceeding alleging November against that Radnor pilfered millions of dollars owed to ECFC. 2007, Radnor and ECFC in the Feltman had Radnor thereafter filed a counterclaim in the arbitration proceeding, asserting that ECFC had wrongfully terminated the 2005 MSA. In January 2008, defendant Anthony W. Hawks a lawyer representing Radnor and Feltman in the arbitration proceeding discovered that ECFC s corporate charter had been revoked in September 1998 because ECFC had failed to file certain reports with the D.C. Department of Consumer and Regulatory Affairs (the DCRA ). Rather than notifying ECFC, Feltman and Hawks instead attempted to determine the legal implications of the revocation. Based on limited legal research, Hawks concluded that, pursuant to D.C. law, ECFC was dissolved as a matter of law and had forfeited any rights it had in the marks ecfc and Employers Council on Flexible Compensation. Accordingly, in February 2008, Feltman and Hawks formed a for-profit corporation in the District of Columbia under the name Employers Council on Flexible Compensation, Ltd. ( ECFC Ltd. ), with each serving as part owner thereof. Feltman and Hawks reserved with the DCRA 4 the acronym ecfc, the trade name Employers Council on Flexible Compensation, and twenty-one variations of that name. Moreover, in Patent and Council on March 2008, Trademark Flexible Hawks Office applied to register Compensation, as identical to ECFC s ecfc logo. obtained the domain name to the the well United mark as a States Employers design mark Finally, Feltman and Hawks ecfc.com which was similar to ECFC s domain name, ecfc.org and maintained a website that was nearly identical to that of ECFC. In March 2008, ECFC first learned of the revocation of its corporate charter and promptly filed for reinstatement. Because Feltman and Hawks had reserved Employers Council on Flexible Compensation as the trade name of ECFC Ltd., ECFC could not be reinstated under its former name and instead chose Flexible Benefits Council (though it continued to operate its website at the domain 2008, ECFC name ecfc.org ). filed this Soon lawsuit thereafter, against the on April defendants in 17, the Eastern District of Virginia, alleging, inter alia, trademark infringement, in contravention of § 43 of the Lanham Act, 15 U.S.C. § 1125(a), and cybersquatting, in contravention of the ACPA, 15 U.S.C. § 1125(d). By its complaint, ECFC sought injunctive relief (1) prohibiting the defendants from using the name Employers variation Council thereof, as on well Flexible as 5 the Compensation acronym ecfc, and any and (2) ordering name. of Lanham [to] party. ECFC defendants to relinquish the ecfc.com domain ECFC also sought reasonable attorney fees under § 35(a) the cases the Act, award which authorizes reasonable attorney 15 U.S.C. § 1117(a). sought up to court fees in to exceptional the prevailing Finally, pursuant to the ACPA, $100,000 cybersquatting claim. a in statutory damages on its See id. § 1117(d) (authorizing recovery of an award of statutory damages in the amount of not less than $1,000 and not more than $100,000 per domain name ). During various hearings conducted over the ensuing months, ECFC and the defendants indicated to the district court that they were intent on disagreed on damages. settling the lawsuit, but that they The defendants maintained that, because they had reasonably believed that they could legally use the name Employers Council on Flexible Compensation and the ecfc logo, their conduct did not warrant awarding ECFC attorney fees under the Lanham Act or statutory damages under the ACPA. Because the only issue in dispute was whether attorney fees and statutory Consent damages Therein, Order, the in entered warranted, by defendants distinctiveness rights were of those agreed [ECFC s] marks. the the court not marks J.A. parties on to or 974. agreed October contest its The to 22, the 2008. further ownership defendants the of or also acknowledged that ECFC s marks are subject to the protections 6 of the Lanham Act. Id. The Consent Order permanently enjoined the defendants from using in any manner ECFC s marks and any names affiliated with the organization, thereby allowing ECFC to re-register itself Council Flexible on with the DCRA under Compensation. the Finally, name Employers the defendants agreed to transfer the domain name ecfc.com to ECFC. Thereafter, the district court by the Damages Opinion of May 14, 2009 granted ECFC s request for attorney fees and statutory damages. the Consent Defendants Notably, the court predicated its ruling on Order, have recognizing admitted liability . . . and cybersquatting. observed that, [a]s [a]t the for outset trademark Damages Opinion 6. agreed to by the . . . that infringement The court also parties, the issues remaining for the Court are [ECFC s] requests for two of the types of damages available under these statutes: fees . . . and statutory damages. Id. attorney[] In other words, the court deemed the Consent Order to be the defendants concession of liability under the Lanham Act and the ACPA, obviating any need to assess the merits of ECFC s claims. Turning to ECFC s request for attorney fees under the Lanham Act, the district court found that the defendants had willfully and deliberately copied ECFC s logo and other items from ECFC s themselves. website in order to divert ECFC s profits to The court also found that Feltman and Hawks had 7 intentionally reserved the name Employers Council on Flexible Compensation in an effort to prevent ECFC from reinstating its corporate charter under that name. The court thus determined that the defendants had acted in bad faith and that the dispute amounted to an exceptional case, warranting an award of reasonable attorney fees to ECFC in an amount to be determined following an evidentiary hearing. to ECFC s request for statutory See Damages Opinion 28. 2 damages under the ACPA, As the court found that the defendants had deliberately registered a domain name ( ecfc.com ) that was confusingly similar to ECFC s domain name ( ecfc.org ). Accordingly, the court awarded ECFC See id. at 30. $20,000 in statutory damages. On May 29, reconsideration 2009, pursuant the defendants to Federal Rule filed a motion of Civil for Procedure 59(e), contending that the district court s award of attorney fees and statutory damages was based on the clearly erroneous factual finding that the defendants had, by the Consent Order, admitted addition, liability under simultaneous the with Lanham their Act and motion for the ACPA. In reconsideration, the defendants moved the court to amend the Consent Order to clarify that they had not conceded liability on ECFC s trademark 2 The district court ultimately awarded ECFC $292,500 in attorney fees under the Lanham Act. The amount of the award is not an issue in this appeal. 8 and cybersquatting claims. 20, 2009, the court By its Memorandum Opinion of August denied each of the defendants motions, finding that the Consent Order s unambiguous terms, coupled with the parties representations to the court before and after the Consent Order was entered, demonstrated that the defendants had conceded liability. See Employers Council on Flexible Comp. v. Feltman, No. 1:08-cv-371 (E.D. Va. August 20, 2009). 3 In denying both motions, the court emphasized that, [w]hen both parties (repeatedly) represent to the Court that they have resolved most of the issues between them and only one issue remains, they are necessarily representing reason to they Id. at 8. issues but that one. no that second-guess the have resolved all of the Because the court could find parties representations on settlement matters, it again concluded that the defendants had conceded liability Accordingly, the in court the Consent denied the Order. defendants Id. at motion 9. for reconsideration and their motion to amend the Consent Order. The defendants have filed a timely notice of appeal, and we possess jurisdiction pursuant to 15 U.S.C. § 1121(a) and 28 U.S.C. § 1291. 3 The district court s August 20, 2009 Memorandum Opinion is found at J.A. 1403 18. 9 II. We review for abuse of discretion a district court s award of attorney fees under the Lanham Act. See Retail Servs. Inc. v. Freebies Publ g, 364 F.3d 535, 550 (4th Cir. 2004). Any factual findings underpinning such an award, however, including the court s determination of whether the case is exceptional, are reviewed for clear error only. See Carolina Care Plan Inc. v. McKenzie, 467 F.3d 383, 390 (4th Cir. 2006), abrogated on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008); see also Schlotzsky s, Ltd. v. Sterling Purchasing & Nat l Distrib. Co., 520 F.3d 393, 402 (5th Cir. 2008) ( The findings of the district court regarding the exceptional nature of a case are reviewed for clear error. ). Similarly, in assessing a district court s award of statutory damages within the range prescribed by statute, we review factual findings for clear error discretion. and the decision to award damages for abuse of See Lyons P ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 799 (4th Cir. 2001). III. On appeal, the defendants raise several challenges to the district court s award of attorney fees and statutory damages. The crux of the defendants appeal, however, is their contention that the court rested its damages award on a clearly erroneous 10 factual finding with respect to the Consent Order namely, that the defendants had therein conceded liability under the Lanham Act and the ACPA. Accordingly, we must first assess the defendants contention that the court erred by not independently determining whether they were liable infringement and cybersquatting claims. on ECFC s trademark We then turn to the defendants assertion that the court erred in deeming the matter an exceptional case, warranting an attorney fees award under the Lanham Act. Finally, we assess the defendants contention that the court abused its discretion in determining that their conduct warranted an award of statutory damages under the ACPA. A. The defendants primary contention on appeal is that the district court abused its discretion because its award of attorney fees and statutory damages was based on the erroneous finding that they had admitted liability in the Consent Order. Emphasizing the terms thereof, the defendants maintain that the Consent Order enjoined them only from using ECFC s marks in the future and contained no explicit admission of liability with respect to their past use of ECFC s marks. They contend that, before the court could properly assess whether the defendants conduct was willful and warranted awarding attorney fees and statutory damages the court first had to determine whether they were in fact liable under the Lanham Act and the ACPA. 11 The defendants conclude that, because the court made no such determination, its award of attorney fees and statutory damages must be vacated. The defendants contention on their concession of liability is belied by the record, however, which is replete with representations to the district court that the Consent Order resolved all issues concerning the merits of the trademark and cybersquatting claims. For example, during a motions hearing on October 15, 2008 before the parties had agreed to the Consent Order ECFC informed the court that the parties had resolved 98 percent of the issues and that the only remaining issue was ECFC s request for attorney fees and statutory damages. 960. J.A. Indeed, both parties confirmed to the court that there was no longer any need for a jury trial, which had been scheduled for early December 2008, and that the damages issue could be resolved following a short evidentiary hearing. Shortly thereafter, during an evidentiary hearing on the damages issue, the court asked the parties whether there were any outstanding issues other than ECFC s request for attorney fees and statutory damages, and all parties responded that there were none. In light of these unambiguous representations, the district court did not clearly err in finding that, by the Consent Order, the defendants had conceded liability under the Lanham Act and the ACPA. See In re Charlie Auto Sales, Inc., 336 F.3d 34, 37 12 (1st Cir. 2003) ( A court s interpretation of a contract or consent order is reviewed for clear error . . . if the court relies on extrinsic (citation omitted)). evidence such as the parties intent. At no point after entry of the Consent Order did the defendants indicate to the court that the issue of their liability on the trademark and cybersquatting claims was outstanding and needed to be resolved. asserted that Order. those issues had been To the contrary, they resolved by the Consent See, e.g., J.A. 1367 (defendants counsel explaining to court that the only thing left [after the Consent Order] was the issue of willfulness and that [t]he only reason that was an issue is because of [ECFC s request for] attorney[] fees ). Accordingly, the defendants cannot successfully claim that the court erred in finding that, by agreeing to the Consent Order, they had admitted liability. Thus, the court did not abuse its discretion in declining to further assess the merits of ECFC s trademark infringement and cybersquatting claims. 4 4 Because this record supports the district court s finding that the defendants conceded liability in the Consent Order, we also reject their appellate contention that the court abused its discretion in refusing to amend the Consent Order. Similarly, the defendants assertion presented for the first time on appeal that they could not be held liable under the ACPA because they were not the registrants of the ecfc.com domain name, see 15 U.S.C. § 1125(d)(1)(D), is without merit. 13 B. The defendants next contend that, in awarding attorney fees pursuant to § 35(a) of the Lanham Act, the district court erred in finding this to be an exceptional case. Section 35(a) authorizes a district court, in exceptional cases involving trademark infringement or cybersquatting, to award reasonable attorney fees to the prevailing party. Although the statute does not 15 U.S.C. § 1117(a). define the term exceptional case, we have recongized that an exceptional case is one in which the willful defendant s or deliberate conduct in was nature. malicious, People fraudulent, for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th Cir. 2001) (internal quotation marks omitted). Put differently, for a request prevailing plaintiff to succeed in a for attorney fees, she must show that the defendant acted in bad faith. Scotch Whisky Ass n v. Majestic Distilling Co., Inc., 958 F.2d 594, 599 (4th Cir. 1992). If the court deems the case exceptional, it must then exercise its discretion to determine whether attorney fees should be awarded. See Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d 1362, 1370 (Fed. Cir. 1999). The defendants maintain that the district court erred in deeming this case exceptional. More specifically, they contend that, reserved when Feltman and Hawks Employers Council on Flexible Compensation as their new business s trade name, they 14 in good faith believed that ECFC had abandoned any rights it had in that name. Because Hawks and Feltman reasonably believed that they could legally use ECFC s marks, the theory goes, the court could not have made the requisite finding of bad faith. The record, however, provides ample support for the district court s determination that Feltman and Hawks willfully and deliberately infringed on ECFC s marks and reserved the name Employers Council on Flexible Compensation in order to prevent ECFC from reinstating defendants ill-will itself toward under ECFC that is name. Indeed, highlighted in the emails exchanged between Hawks and Feltman, wherein they admit that their goal in copying ECFC s marks was to cause[] consternation in the ranks. J.A. 764. Moreover, the record reveals that Hawks and Feltman believed that ECFC had wrongly stolen the company and its profits when it terminated the 2005 MSA, and that the revocation of ECFC s corporate charter presented an opportunity [for Feltman to] retrieve his business by competing directly support against for the at 227. ECFC. Id. court s There determination that is also Hawks ample had only conducted minimal legal research before concluding that ECFC had lost any rights to the name Employers Council on Flexible Compensation and the ecfc logo. Hawks himself testified that he two spent no more than one to 15 hours researching the trademark issues, despite not having encountered such a legal issue in the past ten to twenty years. Id. at 1075 76. In these circumstances, the district court did not clearly err in finding that the defendants acted in bad faith and that the matter was an exceptional case under § 35(a) of the Lanham Act. And, having so concluded, the court did not abuse its discretion in determining that attorney fees were given the nature of the defendants conduct. warranted, Accordingly, we reject the defendants contentions in this regard and affirm the award of attorney fees. C. Finally, the defendants contend that the district court abused its discretion in concluding that their conduct warranted an award of statutory damages under the ACPA. That statute authorizes the owner of a protected mark to bring an action against any person who has a bad faith intent to profit from that mark and registers, traffics in, or uses a domain name that . . . is identical or confusingly similar to . . . that mark. 15 U.S.C. § 1125(d)(1)(A). Upon proving a violation of the ACPA, the owner of the protected mark may 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. 16 Id. § 1117(d). The district court acted well within its discretion in awarding ECFC $20,000 in statutory damages under the foregoing statutory provisions. The court carefully weighed several aggravating and mitigating factors before concluding that the defendants conduct warranted that award. For example, the court acknowledged that the defendants had used the ecfc.com domain name for only profits therefrom. been only one domain that short time and apparently earned no Indeed, the court observed that there had occasion names. factors a of actual Nevertheless, supported the confusion the award court of between the identified statutory two several damages. In particular, the court emphasized that Feltman had exploited a long and close working relationship with ECFC; that the defendants had acted surreptitiously in registering their domain name, without first notifying ECFC of its corporate revocation; and that Hawks had only briefly researched whether ECFC had abandoned its legal rights in the marks ecfc and Employers Council on Flexible Compensation. court did not abuse its In these circumstances, the discretion in making the award of statutory damages. IV. Pursuant to the foregoing, we reject the defendants contentions and affirm. AFFIRMED 17

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.