Federal District Court Opinions
AMERICAN RICE, INC. v. PRODUCERS RICE MILL, INC., (S.D.Tex.
2006) AMERICAN RICE, INC., Plaintiff, v. PRODUCERS RICE
MILL, INC., Defendant. Civil Action No. H-05-3227. United
States District Court, S.D. Texas, Houston Division. July
14, 2006
AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW AND ORDER
SIM LAKE, District Judge
Based on the evidence at trial, the parties’ briefing, and
the court’s post-trial hearings, the court makes the
following Findings of Fact and Conclusions of Law according
to Fed.R.Civ.P. 52. These Findings of Fact and Conclusions
of Law supersede the Findings of Fact and Conclusions of
Law entered on January 10, 2006 (Docket Entry No. 61).
FINDINGS OF FACT
1. For over 35 years plaintiff, American Rice, Inc.
(“ARI”), has continuously sold from the United States into
Saudi Arabia parboiled American long-grain rice under ARI’s
ABU BINT brand. During this period ABU BINT brand parboiled
American long-grain Page 2 rice has been advertised,
promoted, and packaged in conjunction with ARI’s Girl
Design evidenced by Plaintiff’s Ex. 72. During this period
ARI has accounted for about 60-70% of all rice sales from
the United States into Saudi Arabia.
2. Over the last 35 years ARI has spent $25,000,000 to
$30,000,000 advertising and promoting its ABU BINT brand
and related Girl Design, particularly in Saudi Arabia. ABU
BINT brand rice sells at a premium over the price of
competing parboiled American long-grain rice in Saudi
Arabia because of the goodwill it has established there.
3. The ARI Girl Design is the key feature of the ABU BINT
brand. Consumers in Saudi Arabia identify ABU BINT rice by
the ARI Girl Design. Some Saudi consumers refer to ABU BINT
brand rice as “Girl Brand” rice.
4. ARI owns U.S. Trademark Registration No. 882,997,
issued December 23, 1969, for the ARI Girl Design.
(Plaintiff’s Ex. 69) All conditions for incontestability
under 15 U.S.C. § 1065 have occurred. (Admission of
Fact No. 3) The Girl Design registration was most recently
renewed on August 4, 2000. (Plaintiff’s Ex. 69) ARI’s Girl
Design is protectable. Defendant, Producers Rice Mill, Inc.
(“PRMI”), had actual knowledge of the ARI Girl Design and
its registration before it began using the challenged Girl
with Hat Design. (Admission of Fact No. 5) Page 3
5. In April of 2005 ARI sued PRMI for infringing ARI’s
Girl Design registration with PRMI’s Girl Design. In that
case PRMI had attempted to sell into Saudi Arabia parboiled
American long-grain rice using the PRMI Girl Design.
(Plaintiff’s Ex. 73) The parties settled that case by an
agreement dated April 21, 2005 (the “Settlement
Agreement”). (Plaintiff’s Ex. 67) In that Agreement PRMI
promised not to use the PRMI Girl Design or any other
design confusingly similar to the ARI Girl Design. When
PRMI executed the Settlement Agreement it intended to
continue using its Girl with Hat Design (Defendant’s Ex.
10) in the sale of parboiled rice in Saudi Arabia in
competition with ARI.
6. On about September 7, 2005, ARI’s agent in Saudi
Arabia, Alpha Trading and Shipping Agencies Ltd. (“Alpha”),
advised ARI that PRMI was shipping into Saudi Arabia rice
labeled with the PRMI Girl with Hat Design.
7. PRMI began using the Girl with Hat Design in 1985 in
connection with the sale of parboiled rice in Saudi Arabia.
From 1985 until 2004 PRMI used the Girl with Hat Design
with the marks AL FALAHA (in Arabic script) and PAR
EXCELLENCE (in English script). Beginning in the summer of
2005 PRMI changed the Arabic mark to BOTHAINA (in Arabic
script). The female image, or icon, that PRMI uses in the
Girl with Hat Design has remained the same since 1985.
Page 4
8. PRMI adopted the Girl with Hat Design in 1985 because
its customers, who are distributors of rice in Saudi
Arabia, wanted a design with a girl. PRMI chose to continue
to use the Girl with Hat Design in 2005 because its
customers then requested that PRMI use a girl design. PRMI
chose the Girl with Hat Design to benefit from the goodwill
of ARI’s established Girl Design in Saudi Arabia. Although
PRMI’s distributor customers were not confused by the Girl
with Hat Design, both PRMI and its customers knew that
consumers of rice in Saudi Arabia would likely be confused
by the similarities between ARI’s Girl Design and PRMI’s
Girl with Hat Design.
9. The PRMI Girl with Hat Design (Defendant’s Ex. 10) is
confusingly similar to ARI’s Girl Design (Plaintiff’s Ex.
72), and it is likely that many consumers in Saudi Arabia
would be confused as to source, sponsorship, affiliation,
or association of PRMI’s rice.
a. ARI’s Girl Design mark is strong, fanciful, and famous
in Saudi Arabia.
b. The marks are very similar. Both depict young women.
Both women are about the same age, have the same color
hair and similar hairstyles, have a round face, have a
similar physique, feature prominent collars, are posed
behind a rectangular platform, and are holding a bowl of
rice. Both marks use a red, black, and yellow color scheme
of roughly the same tones. The woman in ARI’s Girl Design
appears to be Chinese or East Asian, and is not wearing a
scarf or hat. The woman in PRMI’s Girl with Hat Design is
not Chinese or East Asian and is wearing a scarf or hat.
Page 5
c. The products of the two marks — parboiled
American long-grain rice — are identical.
d. Rice sold by ARI and rice sold by PRMI in Saudi Arabia
are sold in the same channels of trade and are available
to Saudi consumers at the same retail locations, although
PRMI sells more rice to cookhouses and institutions, where
brand is less important to purchasing decisions, and ARI
sells more rice in supermarkets, where brand is more
important to purchasing decisions. Saudi distributors
sell PRMI’s BOTHAINA rice to the same wholesale and
retail locations in Saudi Arabia at which ARI’s ABU BINT
rice is sold.
e. PRMI has never advertised any of its marks in Saudi
Arabia in any media. (Admission of Fact No. 4) PRMI has
not established any goodwill among consumers in Saudi
Arabia with regard to PRMI’s Girl with Hat Design,
independent of the goodwill of the ARI Girl Design.
f. At all times material to this action PRMI knew of the
ABU BINT brand, the related ARI Girl Design, and ARI’s
registration rights. By selling its PRMI Girl with Hat
Design brand parboiled American long-grain rice into Saudi
Arabia, PRMI intended to trade on the goodwill of the ABU
BINT brand and its related Girl Design in disregard of
ARI’s rights.
g. Saudi Arabian consumers often identify rice by the
images or icons associated with those brands. Non-ABU BINT
rice is sometimes sold in Saudi Arabia as ABU BINT rice
under other icons, in counterfeit ABU BINT rice bags, and
in fraudulently refilled ABU BINT bags.
h. There is no evidence of actual confusion in the market
between the ARI Girl Design and the PRMI Girl with Hat
Design.
10. PRMI’s use of the PRMI Girl with Hat Design infringes
ARI’s federal trademark rights. Page 6
11. ARI tendered performance under the 2005 Settlement
Agreement. (Admission of Fact No. 6) PRMI materially
breached the Settlement Agreement by using in connection
with rice sold into Saudi Arabia its Girl with Hat Design
that is confusingly similar to the ARI Girl Design.
12. After the filing of this lawsuit ARI made a reasonable
demand, through an authorized agent of PRMI, that PRMI cease
its use of PRMI’s Girl with Hat Design and any other design
with a girl icon. PRMI did not comply with that demand
within 30 days. ARI has satisfied all conditions precedent
to recovery of attorney’s fees pursuant to TEX. CIV. PRAC.
& REM. CODE § 38.0002.
13. The amount of reasonable and necessary fees is
$383,986.10.[fn1] Although ARI has requested attorney’s
fees of $494,000 for trial and further fees in case of an
appeal, the court Page 7 has reduced this award.[fn2]
ARI’s awarded attorney’s fees do not include
para-professional fees because the evidence does not
establish the qualifications of the para-professionals. In
addition, because ARI has not provided sufficient evidence
to establish the likely amount of attorney’s fees in the
event of a successful appeal, the court will not award such
fees.
14. Prior to September 7, 2005, ARI was not aware and had
no reason to be aware of any sales by PRMI of rice in
connection with the PRMI Girl with Hat Design. PRMI has
shipped and sold rice with the challenged Girl with Hat
Design into Saudi Arabia more or less continuously since
mid-1985. The amount sold varied from year to year, but
averaged between 1,000 and 3,000 tons per year. This amount
is small compared to the total amount of rice sold in Saudi
Arabia on a yearly basis. ARI alone currently sells
approximately 120,000 to 150,000 tons of rice in Saudi
Arabia per year. ARI’s market share is approximately 65
percent of the Saudi Arabian parboiled American long-grain
rice market, and parboiled rice is approximately 10 to 13
percent of the Saudi Arabian total rice market. Although
ARI’s agent, Alpha, actively combed the Saudi markets
looking for infringing marks (e.g., Plaintiff’s Ex. 55),
stumbling across PRMI’s Girl with Hat Page 8 Design would
have been like finding the proverbial needle in the
haystack.
15. PRMI’s argument that ARI had actual knowledge of the
Girl with Hat Design in early 1989 is not borne out by the
evidence. PRMI argues that Alpha complained to the Saudi
Ministry of Commerce about several instances of trademark
infringement, including the AL FALAHA bags with the Girl
with Hat Design. But the fax from Lee Adams of PRMI to his
attorneys containing the Saudi Ministry of Commerce remarks
does not prove that ARI knew of the Girl with Hat Design.
The only statement regarding AL FALAHA reads:
As regards sample No. (12) Al Falaha, there appear at the
bottom of the picture of the bag the words: `Super
American Rice’. Below this phrase there appear the words:
`Net weight 45 Kgs.’ On the back of the bag there appear
the words `Al Jiffri, Jeddah’. These particulars are in
English and we have no remarks in connection with them.
(Defendant’s Ex. 44) Because there is no mention that AL
FALAHA contains a Girl with Hat Design, there is no
evidence that ARI (or Alpha) was actually aware that PRMI
was using a Girl with Hat Design on its AL FALAHA brand by
virtue of its receipt of these documents from the Saudi
Minister of Commerce.
16. PRMI has not established the affirmative defense of
laches.
17. PRMI has nevertheless been prejudiced by the timing of
this action because records of PRMI’s sale of rice in Saudi
Arabia before 2005 are no longer available. Page 9
18. PRMI’s sales of rice in Saudi Arabia in 2005 using the
Girl with Hat Design were $1,256,635. The credible
evidence established that PRMI’s profits from these sales
were $227.10. An award to ARI of an amount greater than
$227.10 would be excessive and would constitute a penalty.
19. ARI is entitled under the Lanham Act to recover PRMI’s
profits on sales of rice in Saudi Arabia in 2005 under the
infringing Girl with Hat Design. PRMI’s conduct in selling
this rice under the Girl with Hat Design was intended to
trade on the goodwill of ARI’s Girl Design, thereby
intending to confuse customers in Saudi Arabia. Although
there is no evidence that sales by ARI were actually
diverted, PRMI’s intent was to sell rice to distributors
who would otherwise likely purchase rice from ARI. Because
of the timing of this action, only sales for 2005 will be
considered since PRMI no longer has adequate records of
sales or costs for earlier years. Although there was no
evidence of “palming off” by PRMI, the public interest in
making trademark infringement unprofitable and in providing
ARI an adequate remedy justifies an award of PRMI’s profits
from 2005 Saudi sales to ARI.
20. A permanent injunction barring PRMI and those recited
in Rule 65(d) from selling, offering to sell, or
transporting rice in connection with a design featuring a
woman in Saudi Arabia and Djibouti without prior approval
by this court is appropriate Page 10 because of PRMI’s
repeated infringement of ARI’s trademark rights by selling
rice in Saudi Arabia with designs featuring a woman.
21. PRMI has custody or control of apparatus bearing the
infringing PRMI Girl with Hat Design. That apparatus will
not be destroyed as part of the injunctive relief ordered
by the court because it is possible that PRMI could use the
apparatus for lawful purposes.
22. Alpha is not a necessary or indispensable party to
this action under Federal Rule of Civil Procedure 19. Alpha
and ARI are co-owners of the Saudi registration of the ABU
BINT brand and related Girl Design. (Defendant’s Ex. 9) ARI
is the sole owner of the U.S. Trademark for the ARI Girl
Design. (Plaintiff’s Ex. 69) Alpha has asserted no interest
in this litigation. (Plaintiff’s Ex. 56)
23. The court declines to make an exceptional case finding
under 15 U.S.C. § 1117 of the Lanham Act. Although
PRMI did intentionally trade on the goodwill of ARI’s Girl
Design, ARI did not prove by clear and convincing evidence
that PRMI’s conduct was so malicious, fraudulent,
deliberate, or willful as to merit an exceptional case
finding. In addition, PRMI asserted a good faith defense of
laches, which militates against an exceptional case
finding. Page 11
24. ARI has failed to elect its remedies between the breach
of contract claim and the Lanham Act claim.[fn3] The court
will therefore do so for ARI, using the findings affording
greater recovery. ARI is entitled to permanent injunction
under both claims, attorney’s fees under its breach of
contract claim, and profits under its Lanham Act claim.
Because the amount of attorney’s fees under the breach of
contract claim is much greater than the amount of profits
awarded under the Lanham Act, the court will award ARI
breach of contract remedies.
CONCLUSIONS OF LAW
1. The Lanham Act provides a trademark registrant a civil
right of action against “any person who shall . . . use in
commerce” a colorable imitation of a registered mark in
connection with the sale, offering for sale, or
distribution of goods. 15 U.S.C. § 1114(1)(a).
Section 1121 provides federal courts with subject matter
jurisdiction over causes of action arising under the Act.
American Rice v. Arkansas Rice Growers Coop. Ass’n, 701
F.2d 408, 412-13 (5th Cir. 1983). Page 12
2. “[A] United States district court has jurisdiction to
award relief to an American corporation against acts of
trademark infringement and unfair competition consummated
in a foreign country by a citizen and resident of the
United States.” Id. at 413 (quoting Steele v. Bulova Watch
Co., 73 S.Ct. 252, 253 (1952)). The facts relevant to the
court’s determination of whether the contacts and interest
of the United States suffice to support the exercise of
extraterritorial jurisdiction include the citizenship of
the defendant, the effect on United States commerce, and
the existence of a conflict with foreign law. Id. at 414.
The list of factors is not exhaustive. Id.
3. The court has jurisdiction over PRMI in this action.
PRMI is an American corporation based in Stuttgart,
Arkansas. It sells rice both domestically and
internationally. Its activities in Saudi Arabia have a
substantial effect on interstate commerce. Like the
defendant in American Rice, PRMI’s Saudi Arabian sales had
more than an insignificant effect on United States
commerce, from the processing and packaging of the rice to
its transportation and distribution. Id. By unlawfully
infringing on ARI’s mark in Saudi Arabia, PRMI affected
ARI, an American company that also processes, packages,
transports, and delivers rice to Saudi Arabia from the
United States. Id. Page 13
4. PRMI has not disputed that its activities have an effect
on United States commerce. PRMI instead argues that its
mark is not infringing under Saudi Arabian law, and
therefore this court does not have jurisdiction to hear
this action. Under Federal Rule of Civil Procedure 44.1, a
party intending to raise an issue of foreign law shall give
written notice. Rule 44.1 allows a federal court to
consider any relevant material or sources in determining
foreign law. PRMI has not adequately proven a conflict with
Saudi Arabian law. The evidence does not demonstrate that
the Saudi Arabian government considers PRMI’s mark
non-infringing upon ARI’s mark.
5. After considering all of the relevant factors and all of
the evidence, the court concludes that it has subject
matter jurisdiction over this action.
6. A cause of action for the infringement of a registered
mark in violation of 15 U.S.C. § 1114 exists where a
person uses (1) any reproduction, counterfeit, copy, or
colorable imitation of a mark; (2) without the registrant’s
consent; (3) in interstate commerce; (4) in connection with
the sale, offering for sale, distribution, or advertising
of any goods; (5) where such use is likely to cause
confusion, or to cause mistake, or to deceive. Boston
Professional Hockey Ass’n v. Dallas Cap & Emblem Mfg.,
Inc., 510 F.2d 1004, 1009-10 (5th Cir. 1975). Page 14
7. In determining a likelihood of confusion, at least the
following factors are relevant:
(1) the type of trademark at issue;
(2) similarity of design;
(3) similarity of product;
(4) identity of retail outlets and purchasers;
(5) identity of advertising media utilized;
(6) defendant’s intent;
(7) actual confusion; and
(8) degree of care exercised by potential purchasers.
Society of Financial Examiners v. National Ass’n of
Certified Fraud Examiners, 41 F.3d 223, 228 n. 10 (5th Cir.
1995) (listing the first seven factors); Oreck Corp. v.
U.S. Floor Systems, Inc., 803 F.2d 166, 170 (5th Cir. 1986)
(listing all eight factors). This list is not exhaustive
and no one factor is controlling. Conan Properties, Inc. v.
Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir. 1985).
8. Evidence of a defendant’s intent to confuse is
sufficient to justify the conclusion that confusion is
likely. Chevron Chemical Co. v. Voluntary Purchasing
Groups, Inc., 659 F.2d 695, 703-04 (5th Cir. 1981);
National Ass’n of Blue Shield Plans v. United Bankers Life
Ins. Co., 362 F.2d 374, 377-78 (5th Cir. 1966).
9. The court may award a trademark owner who establishes
infringement under the Lanham Act injunctive relief,
defendant’s Page 15 profits, any damages sustained by the
plaintiff, the costs of the action, and destruction of
infringing articles. 15 U.S.C. §§ 1116, 1117,
and 1118. Willful infringement is not a prerequisite for
the recovery of profits. Quick Technologies, Inc. v. Sage
Group PLC, 313 F.3d 338, 349 (5th Cir. 2002). Instead, the
court must look at willful infringement along with other
factors to determine whether an award of profits is
appropriate. Those factors include “(1) whether the
defendant had the intent to confuse or deceive, (2) whether
sales have been diverted, (3) the adequacy of other
remedies, (4) any unreasonable delay by the plaintiff in
asserting his rights, (5) the public interest in making the
misconduct unprofitable, and (6) whether it is a case of
palming off.” Id. at 348-49 (citations omitted).
10. When proving a defendant’s profits the plaintiff is
only required to prove defendant’s sales; the defendant
must then prove all elements of costs or deductions
attributable to the sales. 15 U.S.C. § 1117(a). Once
the court has determined that profits should be awarded, it
may award only those profits attributable to the unlawful
use of the trademark. Pebble Beach, 155 F.3d at 554. The
recovery of a defendant’s profits is “subject to the
principles of equity.” Id. The court is directed by
§ 1117(a) that “[i]f the court shall find that the
amount of the recovery based on profits is either inadequate
or excessive the court may in its discretion Page 16
enter judgment for such sum as the court shall find to be
just, according to the circumstances of the case. Such sum
in either of the above circumstances shall constitute
compensation and not a penalty.”
11. Under the Lanham Act the court has the discretion to
enter an injunction to prevent continued infringement. 15
U.S.C. § 1116(a); Pebble Beach Co. v. Tour 18 I, 155
F.3d 526, 549 (5th Cir. 1998). In fashioning an injunction
the proven infringer should be kept safely away from the
perimeter of the plaintiff’s mark to prevent future
infringement. Tamko Roofing Products, Inc. v. Ideal Roofing
Co., Ltd., 282 F.3d 23 (1st Cir. 2002) (affirming an
injunction against defendant’s use of a mark too similar to
defendant’s previously infringing mark). Infringers may be
banned from certain non-infringing uses of trademark when
the infringer has made “generous use of the plaintiff’s
marks in the past.” Pebble Beach, 155 F.3d at 553.
“Otherwise unassailable activities may be proscribed where
a party has transgressed the governing legal standard.” Id.
See also Chevron Chemical Co. v. Voluntary Purchasing
Groups, 659 F.2d 695, 705-06 (5th Cir. 1981); Broderick &
Bascom Rope Co. v. Manoff, 41 F.2d 353, 354 (6th Cir. 1930)
(endorsing the rule to keep infringer a “safe distance away
from the margin line”). Page 17
12. It is not necessary for a plaintiff to establish
actual damage or injury to obtain injunctive relief. Pure
Foods, Inc. v. Minute Maid Corp., 214 F.2d 792 (5th Cir.
1954) (noting all that must be established to stop
defendant is likelihood of confusion, and hence of injury).
This rule is premised on the fact that infringement places
the registrant’s business reputation beyond its control
even though no loss in business is shown. International
Kennel Club, Inc. v. Mighty Star, Inc., 846 F.2d 1079 (7th
Cir. 1988).
13. In “exceptional cases” the court may award attorney’s
fees to a prevailing party in a trademark infringement
case. 15 U.S.C. § 1117. “An exceptional case is one
where the violative acts can be characterized as malicious,
fraudulent, deliberate, or willful.” Pebble Beach, 155 F.3d
at 555 (quoting Seven-Up Co. v. Coca-Cola Co., 86 F.3d
1379, 1390 (5th Cir. 1996)). The prevailing party must
prove an exceptional case by clear and convincing evidence.
Id. After the prevailing party has made this showing, the
court may award attorney’s fees at its discretion. Id.
14. The injunction to be entered will be limited to Saudi
Arabia and Djibouti because these are the only areas about
which ARI offered evidence and about which the court made
findings of fact and conclusions of law. See American
Foods, Inc. v. Golden Flake, Inc., 312 F.2d 619, 626 (5th
Cir. 1963). Although the court Page 18 has discretion to
enjoin defendant from infringing plaintiff’s mark beyond
Saudi Arabia and Djibouti as a breach of contract remedy,
the court declines to do so because injunctive relief
should be limited to that which is necessary to prevent
recurrence of the illegal conduct at issue. This case and
the parties’ previous litigation, see American Rice, Inc.
v. Arkansas Rice Growers Cooperative Ass’n, 701 F.2d 408
(5th Cir. 1983), are ample evidence of PRMI’s long-standing
attempts to trade on the goodwill of ARI’s marks in the
sale of rice. But all of this litigation has focused on
rice sales in Saudi Arabia and to some extent Djibouti. The
court thus sees no persuasive reason to enjoin sales of
rice with infringing marks worldwide, as ARI requests.
15. When determining whether a case is exceptional the
court considers all the facts and circumstances. Id. See
also Proctor & Gamble Co. v. Amway Corp., 280 F.3d 519,
526-28 (5th Cir. 2002). An award of attorney’s fees
“generally `require[s] a showing of a high degree of
culpability on the part of the infringer, for example, bad
faith or fraud.'” Pebble Beach, 155 F.3d at 556 (quoting
Texas Pig Stands v. Hard Rock Caf?© Int’l, 951 F.2d 684, 697
(5th Cir. 1992)). Lack of damages is an important factor in
determining whether a case is exceptional. Id. A court
should normally not find a case exceptional where the party
presents what it in good faith believes may be a legitimate
defense. CJC Page 19 Holdings, Inc. v. Wright & Lato,
Inc., 979 F.2d 60, 66 (5th Cir. 1992).
16. The construction and enforcement of the provisions of
a settlement agreement are governed by Texas contract law.
Eastern Energy, Inc. v. Unico Oil & Gas, Inc., 861 F.2d
1379, 1380 (5th Cir. 1988). Texas leaves interpretation of
a settlement agreement to the court absent an ambiguity.
Id.
17. The elements of a breach of contract action are (1)
the existence of a valid contract, (2) performance or
tendered performance by the plaintiff, (3) breach of the
contract by the defendant, and (4) damages sustained by the
plaintiff as a result of the breach. Prudential Sec. v.
Haugland, 973 S.W.2d 394, 396 (Tex.App.-El Paso 1998, pet.
denied).
18. Whether a breach of contract is a material breach turns
on the facts of each case. Advance Components, Inc. v.
Goodstein, 608 S.W.2d 737, 739 (Tex.Civ.App.-Dallas 1980,
writ ref’d n.r.e.). The Texas Supreme Court has endorsed
the following factors in evaluating the materiality of a
breach: (1) the extent to which the non-breaching party
will be deprived of the benefit that it could have
reasonably anticipated from full performance; (2) the
extent to which the injured party can be adequately
compensated for the part of that benefit of which he will
be deprived; (3) the extent to which the party failing to
perform or Page 20 to offer to perform will suffer
forfeiture; (4) the likelihood that the party failing to
perform or to offer to perform will cure his failure,
taking account of all the circumstances including any
reasonable assurances; and (5) the extent to which the
behavior of the party failing to perform or to offer to
perform comports with standards of good faith and fair
dealing. Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691,
693 n. 2 (Tex. 1994) (citing RESTATEMENT (SECOND) OF
CONTRACTS § 241 (1981)).
19. Contractual rights are enforceable by injunction where
exceptional circumstances exist, such as an inadequate
remedy at law and irreparable injury. Butnaru v. Ford Motor
Co., 84 S.W.3d 198, 209-10 (Tex. 2002). When a settlement
agreement not to use a trademark is breached, the injury is
irreparable and the legal remedy of damages is inadequate
due to the continuing injury to the goodwill of the mark.
See Blue Cross and Blue Shield Ass’n v. American Express
Co., 2005 WL 1838340 at *5-6 (N.D. Ill. 2005); Alfred
Dunhill, Ltd. v. Dunhill Compact Classics, Inc., 11
U.S.P.Q.2d 1078, 1080 (C.D. Cal. 1988). An injunction is
therefore appropriate to enforce a contractual promise not
to use a trademark. Qaddura v. Indo-European Foods, Inc.,
141 S.W.3d 882, 891-92 (Tex.App.-Dallas 2004, pet. denied);
J. THOMAS McCARTHY, McCARTHY ON TRADEMARKS AND UNFAIR
COMPETITION, § 30:2 (4th ed. 2004). Page 21 20. A
successful plaintiff in a breach of contract action is
entitled to attorney’s fees as a matter of right, provided
the conditions precedent set forth in Texas Civil Practice
& Remedies Code § 38.002 are satisfied. TEX. CIV.
PRAC. & REM. CODE § 38.001. To recover attorney’s
fees the plaintiff must be represented by an attorney,
present the claim to the opposing party or to its agent,
and payment must not have been tendered before the
expiration of the 30th day after the claim is presented.
Id. at § 38.002. A party entitled to recover
attorney’s fees at trial is also entitled to recover them
for successfully defending the case on appeal. DP
Solutions, Inc. v. Rollins, Inc., 353 F.3d 421, 436 (5th
Cir. 2003).
21. Moreover, to be entitled to recover attorney’s fees “a
party must (1) prevail on a cause of action for which
attorney’s fees are recoverable, and (2) recover damages.”
Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex.
1997). Although the Texas Supreme Court has never directly
ruled on what form “damages” may take, three Texas courts
of appeals have held that an award of specific performance
alone is sufficient to entitle a prevailing plaintiff to
attorney’s fees under section 38.001 of the Texas Civil
Practice and Remedies Code. See Rasmusson v. LBC
PetroUnited, Inc., 124 S.W.3d 283, 286-87 (Tex.App.-Houston
[14th Dist.] 2003, pet. denied); Butler v. Arrow Mirror &
Glass, Page 22 Inc., 51 S.W.3d 787, 796-97
(Tex.App.-Houston [1st Dist.], no pet.). See also RenewData
Corp. v. Strickler, 2006 WL 504998 at *16-17
(Tex.App.-Austin March 3, 2006, no pet. h.). The “damages”
required by Solis are not limited to pecuniary loss, but
include specific performance such as an injunction. Butler,
51 S.W.3d at 797. See also Price v. Allstate Ins. Co., 2006
WL 1880534 at *1 (5th Cir. July 7, 2006) (per curiam). This
court’s previous opinion in Ryan Energy Technologies v.
CDG-MWD GP, L.L.C., 2006 WL 213916 at *6-9 (S.D. Tex. Jan.
27, 2006), does not hold otherwise. Ryan is inapposite
because there the plaintiff recovered neither monetary
damages for pecuniary loss nor obtained specific
performance. Id. at 9.
22. When a party is entitled to attorney’s fees for some
claims and not others, the prevailing party must segregate
the recoverable attorney’s fees from the unrecoverable
attorney’s fees. Stewart Title Guarantee Co. v. Sterling,
822 S.W.2d 1, 10-11 (Tex. 1991). An exception to this rule
occurs when claims for recover-able and nonrecoverable fees
are intertwined to the point of being inseparable. Id. at
11. Claims are inexorably intertwined when the causes of
action involved in the suit are dependent upon the same set
of facts and circumstances. Id. In this case the
plaintiff’s attorney’s fees are not capable of segregation.
Both the contract claim and the trademark claim are based
on the same Page 23 set of operative facts. Furthermore,
the language of the Settle-ment Agreement prohibits PRMI
from using the PRMI Girl Design or any design “confusingly
similar” to the ARI Girl Design at issue in this case. The
Settlement Agreement was entered into to resolve a
previously-filed lawsuit between the parties, and proof of
breach of the Settlement Agreement largely overlaps and
involves many of the same issues as ARI’s Lanham Act claim.
To prove both claims, ARI must establish that PRMI’s use of
the PRMI Girl with Hat Design was likely to cause confusion
with ARI’s Girl Design.
23. The “election of remedies” doctrine is an affirmative
defense that under certain circumstances bars a person from
pursuing two inconsistent remedies. Medina v. Herrera, 927
S.W.2d 597, 600 (Tex. 1996) (citing Bocanegra v. Aetna Life
Ins. Co., 605 S.W.2d 848, 850-52 (Tex. 1980). “An election
of remedies is the act of choosing between two or more
inconsistent but coexistent modes of procedure or relief
allowed by law on the same set of facts. When a party thus
chooses to exercise one of them he abandons his right to
exercise the other remedy[.]” Custom Leasing, Inc. v. Texas
Bank and Trust Co. of Dallas, 491 S.W.2d 869, 871 (Tex.
1973). The election doctrine may constitute a bar to relief
when (1) one successfully exercises an informed choice (2)
between two or more remedies, rights, or states of facts
(3) which are so inconsistent as to (4) constitute manifest
injustice. Bocanegra, 605 S.W.2d at 851. If a prevailing
party Page 24 fails to elect between alternative measures
of damages, the court should utilize the findings affording
the greater recovery and render judgment accordingly.
Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361, 367
(Tex. 1987).
24. A plaintiff may not pick and choose among damage
elements arising under alternative theories of recovery.
See Quest Medical, Inc. v. Apprill, 90 F.3d 1080, 1093-94
(5th Cir. 1996) (citing Holland v. Hayden, 901 S.W.2d 763
(Tex.App.-Houston [14th Dist.] 1995, writ denied)). An
election of remedies is not required when the theories of
recovery are co-existent and not alternative. Calstar
Properties, L.L.C. v. City of Fort Worth, 139 S.W.3d 433,
440 (Tex.App.-Fort Worth 2004, no pet.). ARI’s Lanham Act
cause of action and its breach of contract cause of action
are inconsistent because they involve different theories of
recovery for the same injury from the same party. Allowing
profits under the Lanham Act and attorney’s fees under the
breach of contract action would allow ARI to pick and
choose damage elements under each theory.
25. Texas law governs the reasonableness of attorney’s
fees under Texas Civil Practice and Remedies Code section
38.001(8). Mathis v. Exxon Corp., 302 F.3d 448, 462. Under
Texas law, there is a rebuttable presumption of
reasonableness for fees that are “usual” or “customary.”
TEX. CIV. PRAC. & REM. CODE § 38.003. When the issue
of attorney’s fees is tried to the court, the judge may
Page 25 take judicial notice of the “usual and customary
fees” and the contents of the case file. Id. at §
38.004. See also Mathis, 302 F.3d at 462. The court will
take judicial notice of both the usual and customary fees
and the contents of the court’s file.
26. To determine the reasonableness and necessity of
attorney’s fees, the court considers the following eight
factors: (1) the time and labor required, the novelty and
difficulty of the questions involved, and the skill
required to perform the legal services properly; (2) the
likelihood that the acceptance of the particular employment
will preclude other employment by the lawyer; (3) the fee
customarily charged in the locality for similar legal
services; (4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
circumstances; (6) the nature and length of the
professional relationship with the client; (7) the
experience, reputation, and ability of the lawyer or
lawyers performing the services; and (8) whether the fee is
fixed or contingent on results obtained or uncertainty of
collection before the legal services have been rendered.
Arthur Anderson & Co. v. Perry Equip. Corp., 945 S.W.2d
812, 818 (Tex. 1997). Paralegal and other para-professional
legal work that went into an attorney’s work product is
properly included in the Page 26 attorney’s fees at a
reduced rate. See Richards v. Mena, 907 S.W.2d 566, 572
(Tex.App.-Corpus Christi 1995, writ dism’d by agr.); Nat’l
Dev. and Research Corp. v. Panda Global Energy Co., 2002 WL
1060483 (Tex.App.-Dallas 2002, pet. denied). However, to
recover such amounts, the evidence must establish that (1)
the legal assistant is qualified through education,
training, or work experience to perform substantive legal
work; (2) that substantive legal work was performed under
the direction and supervision of an attorney; (3) the
nature of the legal work that was performed; (4) the hourly
rate being charged for the legal assistant; and (5) the
number of hours expended by the legal assistant. Gill Sav.
Ass’n v. Int’l Supply Co., Inc., 759 S.W.2d 697, 702
(Tex.App.-Dallas 1988, writ denied).
27. In order to establish an affirmative defense of laches
a defendant must prove:
(a) a delay in asserting a right or claim,
(b) that the delay was not excusable, and
(c) that there was undue prejudice to the defendant.
Westchester Media v. PRL USA Holdings, Inc., 214 F.3d 658,
668 (5th Cir. 2000). Prejudice is required because laches
is “`designed to promote justice by preventing surprises
through the revival of claims that have been allowed to
slumber until evidence has been lost, memories have faded,
and witnesses have disappeared.'” Page 27 National Ass’n
of Gov’t Employees v. City Public Serv. Bd., 40 F.3d 698,
710 (5th Cir. 1994) (quoting Order of Railroad Telegraphers
v. Railway Express Agency, Inc., 64 S.Ct. 582, 586 (1944)).
The period for laches begins when the plaintiff knew or
should have known of the infringement. Elvis Presley
Enterprises, Inc. v. Capece, 141 F.3d 188, 205 (5th Cir.
1998).
28. To succeed in having this action dismissed for failure
to join a party required by Federal Rule of Civil Procedure
19, PRMI must show that Alpha is a necessary party, and if
so to show that Alpha is indispensable. See Nottingham v.
General American Communications Corp., 811 F.2d 873, 880
(5th Cir. 1987); James v. Valvoline, Inc., 159 F.Supp.2d
544, 550 (S.D. Tex. 2001). A necessary party is one (1) in
whose absence complete relief cannot be accorded among
those already parties, or (2) the party claims an interest
relating to the subject of the action and is so situated
that the disposition of the action in the party’s absence
may (i) as a practical matter impair or impede the party’s
ability to protect that interest or (ii) leave any of the
parties already in the litigation subject to a substantial
risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of the claimed interest.
FED. R. CIV. P. 19(a).
29. If a party is necessary but cannot be joined, the
court must determine whether that person is indispensable
and whether in Page 28 equity and good conscience the
action should be dismissed. FED. R. CIV. P. 19(b). To make
this determination the court considers whether the party’s
absence would be prejudicial to that party or those already
parties; whether the court can shape the relief granted to
lessen or avoid the prejudice; whether a judgment rendered
in that party’s absence would be adequate; and whether the
plaintiff will have an adequate remedy if the action is
dismissed for nonjoinder. Id.
30. Under Rule 19 owners of trademarks are usually treated
as necessary and indispensable parties in a trademark case.
See, e.g., Association of Co-operative Members, Inc. v.
Farmland Indus. Inc., 684 F.2d 1134, 1143 (5th Cir. 1982).
They are usually treated as indispensable because trademark
owners have an interest in being able to fully exploit
their marks that might be impaired if the opposing party
prevails. See Jaguar Cars Ltd. v. Manufactures Des Montres
Jaguar, 196 F.R.D. 306, 308 (E.D. Mich. 2000). See also
Lisseveld v. Marcus, 173 F.R.D. 689, 693 (M.D. Fla. 1997)
(noting that this situation typically arises when the
licensee of a trademark asserts its rights against an
alleged infringer without joining the licensor). In this
action the reasoning does not apply because Alpha does not
have a recognized interest in the plaintiff’s U.S.
Trademark. See Barcelona.com, Inc. v. Excelentisimo
Ayuntamiento de Barcelona, 330 F.3d 617, 628 Page 29 (4th
Cir. 2003) (noting that United States courts do not
entertain actions seeking to enforce trademark rights that
exist only under foreign law). See also A&L Laboratories,
Inc. v. Bou-Matic LLC, 429 F.3d 775, 781 (8th Cir. 2005)
(affirming decision of district court not to add parent
company as a necessary party because parent company used
the trademarks in Europe and the parties did not raise
issues of foreign trademark ownership). PRMI has not
addressed the issue of how Alpha’s foreign trademark makes
it a necessary party, or given any other reason that Alpha
is a necessary party. PRMI has therefore failed to meet its
burden under Rule 19.
To the extent that any Finding of Fact is more properly
characterized as a Conclusion of Law it is ADOPTED as such.
To the extent that any Conclusion of Law is more properly
characterized as a Finding of Fact it is ADOPTED as such.
ORDER
The court will enter a final judgment awarding ARI (1) a
permanent injunction, (2) ARI’s reasonable attorney’s fees
of $383,986.10, and (3) post-judgment interest on this
amount. All other relief sought by either party is DENIED.
[fn1] ARI has requested $461,315 for trial court attorney’s
fees, not including non-attorney personnel or expenses.
ARI’s Agreed Attorney’s Fee Calculation, Docket Entry No.
94. PRMI has offered several specific, valid objections to
ARI’s attorney’s fees, which ARI failed to respond to
despite being given numerous opportunities to do so. The
court therefore has reduced the amount of $461,315 by
$72,307.50 based on objections by PRMI. Appendix A of
PRMI’s (1) Objections to Plaintiff’s Request for Attorney’s
Fees and (2) Renewed Request for Unredacted Copy of
Attorney Bills, Docket Entry No. 82. The court has
additionally reduced ARI’s attorney fee award by $5,021.40
based on later-filed objections by PRMI. PRMI’s
Acknowledgment of Amount of Attorney’s Fees Claimed by
Plaintiff, Docket Entry No. 92.
[fn2] Plaintiff’s Exhibit 79 (requesting $494,000 in
attorney’s fees for trial and further fees in the event of
a successful appeal).
[fn3] ARI filed a Conditional Election of Remedies and
Motion for Rendition of Judgment (Docket Entry No. 85)
conditionally waiving any recovery of profits greater than
$1,256,635 and waiving attorney’s fees if the court awarded
ARI injunctive relief and profits of $1,256,635. Because
the profits later found recoverable are substantially less
than $1,256,635, the court does not consider the
Conditional Election of Remedies to be a valid election
under Texas law. Page 1