Harbor Breeze Corp. v. Newport Landing Sportfishing, Inc., No. 19-56138 (9th Cir. 2022)
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Plaintiffs filed suit against defendants, alleging unfair competition in violation of section 43 of the Lanham Act. A jury found that defendants engaged in materially false or misleading advertising about their competing whale-watching-cruise business in violation of the Lanham Act, but awarded $0 in actual damages and declined to award an equitable remedy of disgorgement of profits. The district court then issued a permanent injunction prohibiting defendants from engaging in specified future acts of false advertising, denied plaintiffs' request for attorneys' fees, and entered judgment.
The Ninth Circuit reversed the judgment to the extent that it denies an award of profits and remanded for a new trial on that issue. The panel concluded that, under Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), the district court erred in instructing the jury on the element of willfulness. Instead, defendant's mental state is a highly important consideration in determining whether an award of profits is appropriate. The panel declined plaintiffs' request to remand the case with specific instructions to conduct a new jury trial, declining to apply judicial estoppel to either side and holding that Federal Rule of Civil Procedure 39(c) does not require that the retrial on remand be a jury trial. The panel also vacated the district court's attorneys' fee determination because retrial of the disgorgement issue could affect the assessment of some of the relevant circumstances.
Court Description: Lanham Act. The panel reversed in part and vacated in part the district court’s judgment, after a jury trial, awarding only injunctive relief in favor of plaintiffs in an action under the Lanham Act. Harbor Breeze Corp. and its affiliate sued Newport Landing Sportfishing, Inc., and its affiliates for unfair competition. The jury found that defendants had engaged in materially false or misleading advertising about their competing whale-watching-cruise business, but the jury awarded $0 in actual damages and also declined to award the equitable remedy of disgorgement of profits. The district court then issued a permanent injunction prohibiting defendants from engaging in specified future acts of false advertising, and denied plaintiffs’ request for attorneys’ fees. Reversing in part, the panel held that under Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), the * The Honorable Stephen A. Higginson, United States Circuit Judge for the U.S. Court of Appeals for the Fifth Circuit, sitting by designation. HARBOR BREEZE V. NEWPORT LANDING SPORTFISHING 3 district court erred in instructing the jury that, in order to be awarded defendants’ profits from their alleged false advertising, plaintiffs had to show that defendants acted willfully. Rather, under the correct legal standard, a defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate. The panel reversed the judgment to the extent that it denied an award of profits and remanded for a new trial on that issue. The panel declined plaintiffs’ request to remand the case with specific instructions to conduct a new jury trial on disgorgement of profits, an equitable issue ordinarily left to the court. The panel concluded that neither plaintiffs nor defendants were equitably estopped from making arguments about whether the jury verdict on profits was binding under Federal Rule of Civil Procedure 39(c)(2) or merely advisory under Rule 39(c)(1). Distinguishing a Third Circuit case, the panel concluded that because the prior verdict on the issue of disgorgement was defective, no valid portion of that verdict would be disrespected, implicitly or explicitly, by allowing a bench trial on remand. The panel held that Rule 39(c) did not require that the retrial on remand be a jury trial. Because retrial of the disgorgement issue could affect the district court’s assessment of some of the relevant circumstances, the panel also vacated the district court’s attorneys’ fee determination.
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