Fendi Adele, S.R.L. v. Ashley Reed Trading, Inc.

11-3025-cv (L)
Fendi Adele, S.R.L. v. Ashley Reed Trading, Inc.

                           UNITED STATES COURT OF APPEALS
                               FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING
A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan Courthouse, 500 Pearl Street, in the City of New York, on the 4th day
of January, two thousand thirteen.

Present:
         ROBERT A. KATZMANN,
         BARRINGTON D. PARKER,
         RICHARD C. WESLEY,
                     Circuit Judges.
________________________________________________

FENDI ADELE, S.R.L., FENDI S.R.L., FENDI NORTH AMERICA, INC.,

           Plaintiffs-Appellees-Cross-Appellants,

                  v.                                            Nos.   11-3025-cv (Lead)
                                                                       11-3027-cv (Con)
                                                                       11-3058-cv (XAP)

ASHLEY REED TRADING, INC., SCOTT RESSLER, JAMES RESSLER,

         Defendants-Appellants-Cross-Appellees.
________________________________________________

For Plaintiffs-Appellees
-Cross-Appellants:                       RICHARD L. MATTIACCIO, (Victor Genecin, Steven A.
                                         Delchin, Samuel Spital, and Corrine A. Irish, on the
                                         brief), Squire Sanders LLP, New York, NY
For Defendants-Appellants-Cross
-Appellees Ashley Reed Trading, Inc.
& Scott Ressler:                          GERARD F. DUNNE, Law Firm of Gerard F. Dunne,
                                          New York, NY

For Defendant-Appellant
-Cross-Appellee James Ressler:            DAVID I. SCHOEN, Montgomery, AL



      Appeal from the United States District Court for the Southern District of New York
(Berman, J.).

       ON CONSIDERATION WHEREOF, it is hereby ORDERED, ADJUDGED, and

DECREED that the judgment of the district court be and hereby is AFFIRMED IN PART,

VACATED IN PART AND REMANDED.

       Defendants-Appellants-Cross-Appellees Ashley Reed Trading, Inc., Scott Ressler, and

James Ressler (collectively, “Ashley Reed”) appeal a June 30, 2011, judgment of the United

States District Court for the Southern District of New York (Berman, J.). On summary

judgment, the district court held Ashley Reed liable for trademark counterfeiting, false

designation of origin, and trademark dilution under the Lanham Act, 15 U.S.C. § 1051 et seq.,

and for unfair competition and trademark dilution under New York state law. The district court

awarded Plaintiffs-Appellees-Cross-Appellants Fendi Adele S.R.L., Fendi S.R.L., and Fendi

North America, Inc. (collectively, “Fendi”) $12,324,062.66 in trebled damages, prejudgment

interest, costs, and attorneys’ fees. Specifically, because it found willful infringement, the court

ordered the disgorgement of Ashley Reed’s profits from selling Fendi-branded products in 2005

and 2006.




                                                  2
       On appeal, Ashley Reed contends that the district court erred by (1) rejecting its

affirmative defenses of acquiescence and laches, (2) admitting Leonardo Minerva’s testimony

that Fendi-branded products sold by Ashley Reed were counterfeit, (3) finding Ashley Reed

liable for infringement that occurred before 2005, (4) deciding on summary judgment that

Ashley Reed’s infringement was willful despite disputed questions of fact, and (5) failing to

deduct Ashley Reed’s costs from its gross revenue when calculating its profits. James Ressler

separately argues that the district court erred by refusing to stay his deposition pending

completion of criminal proceedings against him. On cross-appeal, Fendi challenges the district

court’s decision to award damages based only on Ashley Reed’s 2005 and 2006 profits even

though the court appeared to find the defendants liable from 2001 to 2004 as well.1 We assume

the parties’ familiarity with the underlying facts and procedural history of this case, as well as

the issues on appeal.

       We review a district court’s grant of summary judgment de novo. 10 Ellicott Square

Court Corp. v. Mtn. Valley Indem. Co., 634 F.3d 112, 119 (2d Cir. 2011). Summary judgment is

“appropriate where there exists no genuine issue of material fact and, based on the undisputed

facts, the moving party is entitled to judgment as a matter of law.” Id. (internal quotation mark

omitted). The moving party must offer concrete evidence showing the absence of a disputed

issue of material fact, and then the burden shifts to the nonmoving party to present specific

evidence showing a genuine dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986).




       1
          Fendi argues that it is entitled to damages from 2000 to 2006, but the district court
stated that there was evidence of defendants’ awareness of counterfeit goods “since 2001,” so we
assume that the relevant period on appeal is 2001 to 2006.

                                                  3
       We first address Ashley Reed’s contention that the affirmative defenses of acquiescence

and laches should have barred Fendi’s claims. To prove acquiescence, a defendant must

demonstrate that the plaintiff actively consented. Active consent means “conduct on the

plaintiff’s part that amount[s] to an assurance to the defendant, express or implied, that the

plaintiff would not assert his trademark rights against the defendant.” ProFitness Physical

Therapy Ctr. v. Pro-Fit Orthopedic & Sports Physical Therapy P.C., 314 F.3d 62, 68 (2d Cir.

2002) (alteration in original) (internal quotation marks omitted). Laches will bar a plaintiff’s

claim when a defendant has been prejudiced by a plaintiff’s unreasonable delay in bringing suit;

no affirmative consent is required because the unreasonable delay implies consent. Id. at 67.

Here, the parties agree that Ashley Reed bears the burden of proof.

       Ashley Reed failed to prove either defense. There is no evidence that Fendi actively

consented to infringement by Ashley Reed. Although Fendi remained silent for several years

after the 2001 meetings between the parties, Fendi was entitled to investigate and was under no

obligation to respond. Ashley Reed was on notice that Fendi believed it was selling infringing

products. Moreover, Ashley Reed presented no evidence that Fendi unreasonably delayed in

filing suit. On the contrary, Fendi sued promptly after discovering counterfeit handbags that it

could prove were sold by Ashley Reed.

       We next turn to Ashley Reed’s argument that the district court erred in considering

Leonardo Minerva’s deposition testimony, which Ashley Reed contends was inadmissible. The

district court “has wide discretion in determining which evidence is admissible [on summary

judgment, and] we review its evidentiary rulings for manifest error.” Nora Beverages, Inc. v.

Perrier Grp. of Am., Inc., 164 F.3d 736, 746 (2d Cir. 1998). Given this highly deferential


                                                 4
standard of review, we cannot say it was “manifest error” for the district court to conclude that

Minerva’s testimony was based on sufficient personal knowledge. Although Minerva’s assistant

performed the initial inspections of the allegedly counterfeit items and drafted the reports,

Minerva testified that he reviewed each report, discussed them with his assistant, made revisions

as necessary, and approved each report. As part of this process, Minerva looked at each item and

personally double-checked at least one indicator of the item’s counterfeit nature. He also

testified that he would not have signed a report if he thought it was inaccurate and that each

report he was shown refreshed his recollection of inspecting that item. Additionally, even

assuming that Minerva read directly from the reports during his testimony, the district court has

considerable discretion to permit a witness to consult a writing when the information is highly

detailed. See United States v. Riccardi, 174 F.2d 883, 890 (3d Cir. 1949) (allowing the witness

to read from a document when “the items . . . involved were so numerous that in the ordinary

course of events no one would be expected to recite them without having learned a list by rote

memory”).2

       Ashley Reed does not dispute that Minerva’s testimony—if admissible—establishes its

liability for infringement during 2005 and 2006. However, it argues that a trial was necessary to

determine whether it infringed Fendi’s trademarks before 2005 because there was no direct proof

that it infringed during that period. Although Fendi did not produce any counterfeit items sold


       2
           See also S. Broun, McCormick on Evidence § 9 (6th ed. 2009) (“[When a document is]
so lengthy and detailed that even a witness with a fresh memory would realistically be unable to
recite all the items unaided,” a witness “may be unable to detail those facts from memory
without consulting the writing. Accordingly, the generalization that, once refreshed, a witness
must speak independently of the writing is too inflexible [and] the matter ought to be entrusted to
the trial judge's discretion.”).


                                                 5
by Ashley Reed before 2005, there is a significant amount of circumstantial evidence that

supports the district court’s apparent finding of liability.3 During that time, Ashley Reed was

operating under the same procedures as it was in 2005 when it sold the counterfeit bags

inspected by Minerva. As discussed further below, it failed to keep adequate records of its

transactions with its suppliers and to adequately check the authenticity of the goods it purchased.

Moreover, Fendi’s Chief Financial Officer compared invoices that Ashley Reed did retain to

legitimate Fendi records and concluded that many of Ashley Reed’s invoices—dated as early as

2000— were forgeries. Given that Ashley Reed was buying products with fabricated Fendi

invoices as early as 2000, it strains credulity to believe that none of these products were

counterfeit. The district court did not err in resolving Ashley Reed’s liability for the entire 2001

to 2006 period on summary judgment.

       Once liability is established, Fendi’s entitlement to Ashley Reed’s profits depends upon

whether the infringement was willful. Fendi argues that it does not need to prove willfulness,

relying on decisions from some of our sister circuits holding that a 1999 amendment to the

Lanham Act changed the governing rule. See, e.g., Banjo Buddies, Inc. v. Renosky, 399 F.3d

168, 174 (3d Cir. 2005). However, we need not resolve the question because, assuming

arguendo that Fendi is still required to prove willfulness, the district court properly concluded on

summary judgment that Ashley Reed willfully infringed Fendi’s trademarks. To prove

willfulness, a “plaintiff must show (1) that the defendant was actually aware of the infringing


       3
          The district court did not make an explicit finding about the period of infringement, but
after the magistrate judge recommended that the case proceed to trial to determine whether
Ashley Reed was liable for infringement from 2001 to 2004, the court rejected this
recommendation and concluded that its previous decision on summary judgment had “resolved
the question of [Ashley Reed’s] liability for counterfeiting.”

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activity, or (2) that the defendant’s actions were the result of reckless disregard or willful

blindness.” Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 263 (2d

Cir. 2005) (internal quotation marks omitted). In the context of a trademark infringement action,

willful blindness means that a defendant knew it might be selling infringing goods but

nevertheless “intentionally shielded itself from discovering” the truth. Tiffany (NJ) Inc. v. eBay

Inc., 600 F.3d 93, 109 (2d Cir. 2010). Despite Ashley Reed’s claims, willful blindness can be

proven on summary judgment; a finding of actual knowledge is not required. See, e.g., United

States v. 755 Forest Road, 985 F.2d 70, 73 (2d Cir. 1993).

       Ashley Reed argues that the district court ignored reasonable inferences that should have

been drawn in its favor and, in doing so, improperly resolved disputed questions of material fact.

However, given the evidence, no reasonable jury could have credited these proposed inferences.

Ashley Reed was clearly on notice that it might be infringing trademarks after Fendi’s 2001

cease and desist letter and multiple lawsuits filed by other designers in 2000 and 2001.

Nevertheless, the record shows that Ashley Reed failed to adequately inquire about the

authenticity and original sources of the goods they purchased. Ashley Reed’s suppliers provided

defendants with “sanitized” invoices that did not disclose the original sources and, in some cases,

refused to provide any paperwork. Ashley Reed also failed to maintain records of their

transactions with suppliers and other key financial documents and did not retain any

documentation of its purported side-by-side comparisons of its goods with genuine Fendi

merchandise. Perhaps most tellingly, Ashley Reed returned its remaining Fendi merchandise to

its suppliers after Fendi filed suit instead of allowing it to be inspected and did not keep any

records concerning these goods or their return.


                                                  7
       Under these circumstances, a reasonable jury could not conclude that Ashley Reed acted

with sufficient care to ensure that its goods were not counterfeit given that they were on notice of

the goods’ possibly counterfeit nature. Similarly, a reasonable jury could not credit Scott

Ressler’s testimony that he conducted side-by-side comparisons to ensure his products’

authenticity given the lack of records and obvious differences—according to Mr.

Minerva—between the counterfeit goods and genuine Fendi products. See Scott v. Harris, 550

U.S. 372, 378-80 (2007) (holding that a court should not credit testimony on summary judgment

when it is so clearly contradicted by other evidence that no reasonable jury could believe it).

Even if we credited Scott Ressler’s testimony that a Fendi inspector assured him that certain

goods from certain suppliers would be authentic, Ashley Reed does not contend that it purchased

all of its Fendi-branded products through those channels. Additionally, the other evidence

establishes that the defendants exhibited willful blindness with respect to the goods it acquired

through other channels. Therefore, the district court correctly concluded that Ashley Reed’s

infringement was willful as a matter of law.

       Separate from his co-defendants, James Ressler contends that the district court should

have stayed his deposition until the termination of federal criminal proceedings against him.

This argument is without merit. As an initial matter, nothing prevented Mr. Ressler from

petitioning the district court to allow him to submit an affidavit after his criminal trial had ended;

however, he declined to do so. Moreover, we have held that in this context we will not disturb

“[a] decision so firmly within the discretion of the district court” unless “it vitiates a defendant’s

constitutional rights or otherwise gravely and unnecessarily prejudices the defendant’s ability to

defend his or her rights.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 100 (2d Cir.


                                                  8
2012). Here, the court accommodated Ressler by scheduling his deposition last. It considered

the possible prejudice to Mr. Ressler but ultimately concluded that a stay was inappropriate

because it was not necessary to protect Ressler’s Fifth Amendment rights and it would further

delay a discovery process that had already been significantly delayed. This was not an abuse of

discretion.

       The final two issues both relate to the calculation of damages. The district court used

Ashley Reed’s revenues from selling Fendi-branded products as a proxy for its profit and did not

subtract any of the costs Ashley Reed might have expended in acquiring the bags or operating its

business. Ashley Reed argues that this was error. However, a defendant bears the burden to

prove any “deductions” from its gross revenue in calculating profits, Manhattan Industries, Inc.

v. Sweater Bee by Banff, Ltd., 885 F.2d 1, 7 (2d Cir. 1989), and Ashley Reed failed to present

any specific evidence of its costs. Therefore, the district court correctly declined to deduct any

of Ashley Reed’s purported costs.

       On cross-appeal, Fendi contends that it was entitled to recover Ashley Reed’s profits

from 2000 to 2006 but that the district court’s award only covered 2005 and 2006. We agree that

the damage award seems facially inconsistent with the court’s apparent conclusion that Fendi

had proven infringement during the entire 2001 to 2006 period. The district court has the

discretion to award profits “subject to the principles of equity,” 15 U.S.C. § 1117(a), and

therefore could decide to award Fendi less than Ashley Reed’s total profits from 2001 to 2006 if

it believed that was the equitable result. The district court may have believed that this was the

case, but, if so, it did not explain its reasoning even after the magistrate judge pointed out the

apparent discrepancy. Under these circumstances, we vacate the current damage award and


                                                  9
remand to the district court for a determination in the first instance of whether it would be

equitable to award damages only for 2005 and 2006.4

           For the reasons stated herein, the district court’s decision is AFFIRMED IN PART,

VACATED IN PART, and REMANDED.


                                                  FOR THE COURT:
                                                  CATHERINE O’HAGAN WOLFE, CLERK




       4
          As noted above, we assume that the district court’s judgment covered the 2001 to 2006
period and not the year 2000. However, even if the district court determines that the relevant
period should begin in 2000, the court must also consider whether Fendi would be entitled to
damages for that period given that the cease and desist letter was not sent until 2001 and,
therefore, Ashley Reed may not have been on notice of its possible infringement.

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