Yah Kai World Wide Enters., Inc. v. Napper
Yah Kai World Wide Enters., Inc. v. Napper
Opinion of the Court
At the conclusion of a three-day bench trial held in July of 2015, this Court determined that Defendant Geoffrey Napper is liable for trademark infringement, unfair competition, and conversion in connection with Napper's appropriation and control of the food-service business in Capitol Heights, Maryland that is presently named "Everlasting Life Restaurant & Lounge." See *342Yah Kai World Wide Enters., Inc. v. Napper ,
In short, after reviewing the evidence presented at both trials, the parties' submissions, and the legal theories that the parties contend apply to the established facts of this case, this Court finds that Plaintiffs have demonstrated that they are entitled to monetary damages for Napper's violation of the Lanham Act,
Accordingly, JUDGMENT WILL BE ENTERED IN PLAINTIFFS' FAVOR against Napper for monetary damages in the amount of $2,598,849 (consisting of: $1,856,144 for Napper's profits and $545,407 for Plaintiffs' actual damages for trademark infringement/unfair competition, plus $142,864 in compensatory damages for conversion and $54,434 in prejudgment interest on those conversion damages). In addition, Plaintiffs will recover a yet-to-be determined amount of attorney fees and costs arising from the litigation of Plaintiffs' trademark infringement claims. A separate order consistent with the Court's findings and conclusions will follow.
I. BACKGROUND
A. The Court's Liability Findings
This Court's Findings of Fact and Conclusions of Law regarding Napper's liability for certain breaches of the Lanham Act and Maryland common law are laid out in a lengthy Memorandum Opinion that the Court issued on July 3, 2016. (See Findings of Fact & Conclusions of Law, ECF No. 69.) The background facts are recited at length in that opinion, and need not be reproduced here.
It suffices to recall now that Plaintiffs are members of the African Hebrew Israelite Community ("the Community"), which follows a strict vegan diet, see Yah Kai I ,
After a bench trial regarding Napper's liability, this Court found that Napper was liable for his actions in forcibly evicting Plaintiffs from the premises, seizing their equipment and goods, and re-opening the business at the same location with the same moniker. See
B. The Present Proceedings
After this Court issued its liability findings, the parties proceeded to engage in additional discovery related to the question of damages, with the initial intention of presenting the damages issues to a jury. (See Scheduling Order, ECF No. 73.) However, Plaintiffs subsequently opted to litigate damages in the context of a second bench trial. (See Notice, ECF No. 85.) That trial began on February 13, 2017, and concluded later that same day. During the trial, Plaintiffs offered the testimony of three witnesses: Prince Immanuel, Napper, and Darrel Edwards (see Feb. 13, 2017 Trial Tr. ("Damages Trial Tr.") at 23:20-155:22); Edwards had served as Yah Kai's accountant and is currently the accountant for Napper and Fair and Balanced, LLC, which is the umbrella corporation that Napper formed to manage his restaurant businesses, see Yah Kai I ,
*344The parties then engaged in the detailed process that this Court requires for submitting proposed findings of fact in the wake of a bench trial. (See Order Regarding Proposed Findings of Fact and Conclusions of Law, ECF No. 103, at 1-2 (requiring the proposed findings to be offered in different iterations and in table format); see also Pls.' Proposed Findings of Fact Regarding Damages, ECF No. 107-1 ("1st Dam. FOF Tbl."); Def.'s Proposed Findings of Fact on Damages, 109-1 ("2nd Dam. FOF Tbl."); 3d Dam. FOF Tbl.)
II. LEGAL STANDARD
"In an action tried on the facts without a jury ... the court must find the facts specially and state its conclusions of law separately." Fed. R. Civ. P. 52(a)(1). "In setting forth the findings of fact, the court need not address every factual contention and argumentative detail raised by the parties, [n]or discuss all evidence presented at trial." Moore v. Hartman ,
III. FINDINGS OF FACT PERTAINING TO THE MONETARY DAMAGES OWED TO PLAINTIFFS AND OTHER REQUESTED REMEDIES
This Court's findings of fact with respect to Plaintiffs' request for damages and injunctive relief are based on the testimony and exhibits that the parties submitted during the second bench trial, the Court's observation of the witnesses' demeanor, the Court's conclusions regarding the witnesses' credibility, the parties' stipulations, and the record as a whole, which includes the evidence offered in the liability bench trial.
A. Overview Of The Evidence Presented During The Damages Trial
As explained above, Plaintiffs called Prince Immanuel, Napper, and Edwards to the stand during the bench trial on damages, and Defendant Napper opted not to put on any case-in-chief. Prince Immanuel was the first to testify. (See Damages Trial Tr. at 24:1-34:6 (Prince Immanuel).) Among other things, his testimony addressed his ownership of the Everlasting Life trademark, the recent expiration of his trademark registration, and the agreements he had with other individuals regarding their use of that trademark. In addition, Prince Immanuel testified about Napper's use of the Everlasting Life trademark to promote the Restaurant after *345Napper evicted Yah Kai from the Complex, including Napper's use of the trademark with respect to internet advertising. For the most part, Prince Immanuel appeared to testify candidly, although he avoided providing direct answers to questions regarding the current registration status of the Everlasting Life trademark. (See, e.g., id. at 30:5-11 ("Q. Have you been made aware [ ] by either your counsel or any other sources that you are no longer the holder of that trademark? A. That's rumored. Q. Rumored? A. We heard that, but again, as I've said, we're following up on that to clarify the situation.").)
Next, Plaintiffs called Napper as an adverse witness. (See id. at 34:14-130:21 (Napper).) While testifying, Napper spoke extensively about his management of the Restaurant and its current parent corporation, Fair and Balanced LLC. Napper's testimony also touched upon the contents of Napper's personal tax returns; the contents of Fair and Balanced's tax returns; Napper's purported ownership of the equipment and inventory present within the Complex on November 15, 2011; the gross sales for the various restaurants Fair and Balanced LLC manages and the amount of those sales that are attributable to the Restaurant; Napper's accountant's handling of Fair and Balanced LLC's profit and loss statements; the number of Everlasting Life employees; Napper's and the Community's relationships to the Restaurant; Napper's use of the Everlasting Life moniker to promote the Restaurant; and Napper's eviction of Yah Kai on November 15, 2011. (See id. ) Napper was frequently unable to respond to questions regarding the Restaurant's finances from 2011 to 2016 (see, e.g., id. at 63:4-7), and his testimony regarding the equipment and assets he converted on November 15, 2011 was imprecise and, at times, evasive (see, e.g. , 113:25-114:4 ("Q. And within the next several days you then took that business and everything that was in it and you reopened it in your own name; right? By that I mean you opened it as your restaurant? A. As Everlasting Life.") ). Furthermore, throughout his testimony, Napper adamantly-and apparently sincerely-contended that he was the rightful owner of the Everlasting Life business. (See, e.g., id. at 99:9-17 ("Your honor, again with all due respect to you and the decision you made ... Everlasting Life has been my business ... and your decision didn't change my heart.").)
At the conclusion of Napper's testimony, Plaintiffs called Everlasting Life's perennial accountant, Darryl Edwards. (See id. at 132:7-155:22 (Edwards).) Edwards testified about how he had prepared tax returns for Napper and for Fair and Balanced LLC, and also how the profit and loss statements for each of Napper's various restaurants are generated. (See id. ) Throughout his testimony, Edwards appeared reluctant to answer questions regarding the Restaurant's profits and expenses, and he admitted that he had not yet complied with Plaintiffs' subpoena demanding individualized profit and loss statements for the Restaurant. (See id. at 142:5-143:10.) Given Edwards's incomplete testimony, the parties and the Court agreed to leave the record open so that Edwards could provide these missing documents for the Court's review after trial. (See id. at 148:23-149:13; 154:21-23.)
In addition to the live testimony presented during the damages trial, the parties stipulated to the admission of several documents, including: (1) all exhibits admitted at the liability trial; (2) personal tax returns for Napper, from 2012-2015 (see Pls.' Damages Trial Ex. 1, ECF No. 114); (3) tax returns for Fair and Balanced LLC, from 2011-15 (see Pls.' Damages Trial Ex. 2, ECF No. 114-1); (4) a 2015 notice regarding Prince Immanuel's Trademark Registration for Everlasting Life (see Pls.' Damages Trial Ex. 4, ECF No. 114-2); (5)
*346advertisements Napper generated for the Everlasting Life Restaurant and Lounge (see Pls.' Damages Trial Ex. 5, ECF No. 114-3); and (6) one of Napper's Facebook posts about the bench trial in this case (see Pls.' Damages Trial Ex. 8, ECF No. 114-4).
B. Noted Record Deficiencies And How This Court Has Addressed Them
This Court's findings of fact, as well as its ultimate determinations regarding the damages owed to Plaintiffs, come with a caveat: the parties in this matter have not presented the kinds of detailed business documentation that one would expect to see in a case such as this one, and this dearth of information has stymied the Court's evaluation of the monetary damages owed to Plaintiffs. For example, due to Napper's bookkeeping and business practices, this Court has had great difficulty determining the costs and expenses that the Restaurant incurred from 2011 to 2015-and, thus, the extent of the Restaurant's profits for that same time period. The difficulty has primarily arisen because, in addition to Everlasting Life, Napper opened two other restaurants (named "Evolve" and "Vegaritos") in this same timeframe (see Damages Trial Tr. at 55:19-56:19 (Napper) ), and he has managed all three foodservice establishments through a single corporate entity-Fair and Balanced, LLC (see 3d Liability FOF Tbl. at 96, 103 (A, B) ). And rather than accounting for these businesses separately, Napper and his accountant appear to have commingled the proceeds and expenses from all of these restaurants in Fair and Balanced LLC's records of expenses and tax returns. (See, e.g. , Everlasting Life Restaurant & Lounge Expenses by Vendor Detail ("Itemized Expenses") (attached hereto as Appendix A ), Def.'s Damages Trial Ex. 1, ECF No. 105-1, at 177, 182 or A8-A9 (showing itemized rental payments for Napper's other restaurants Evolve and Vegaritos); see also Fair and Balanced's Tax Returns FY 2011-15; Damages Trial Tr. at 55:5-58:8.) Thus, despite the fact that the defense has submitted certain financial statements as evidence pertinent to the calculation of damages, there is considerable uncertainty regarding *347the profits that Napper actually derived from Everlasting Life during the relevant timeframe.
The additional fact that Napper has occasionally compensated himself (and his family members) directly-using business proceeds either to repay "loans" owed to his family or to pay himself and family members directly as "contractors"-further compounds the Court's uncertainty about the trustworthiness of the financial records that have been presented. (See, e.g. , Itemized Expenses at 64-65, 82, 85, 94 or Appendix A at A1-A5 (identifying expenses related to Napper or his family members with labels such as "[l]oan," "[r]eimbursement," and "[c]ontractor"); see also Damages Trial Tr. at 43:4-44:23.)
In short, these unorthodox accounting practices and unexplained discrepancies undermine the accuracy of many of Defendant's financial documents, including such significant records as Fair and Balanced LLC's tax returns for 2011-15 (ECF No. 114-1); Napper's personal tax returns for 2012-15 (ECF No. 114); the list of Itemized Expenses that Edwards submitted to the Court after the damages trial (ECF No. 105-1); and portions of the Supplement Itemized Costs and Expenses for Everlasting Life in 2014 and 2015 (ECF Nos. 105-3 & 105-4). And because Plaintiffs' expert report relies on several of these documents to reach its conclusions (see Expert Report, ECF No. 114-5, at 1-2), that report is rendered suspect as well. The Court further notes that in addition to the significant substantive uncertainty regarding the financial information that Napper has provided, various procedural deficiencies pertaining to the format in which the information has been presented are also clearly manifest.
For present purposes, it is also important to note that Napper never submitted any documentation whatsoever regarding the Restaurant's sales, profits, or expenses *348for the 2016 or 2017 calendar years. Plaintiffs served a subpoena seeking the 2016 information prior to the commencement of the damages bench trial, but Napper and his accountant failed to produce this information prior to trial. During the damages trial, the Court directly ordered Napper and his accountant to provide this documentation. (See Damages Trial Tr. at 154:21-23 (Edwards).) And while Napper's accountant acknowledged that a printout of such information would "not [be] a problem" (id. at 153:5-15, 154:12-20), Defendant's tardy submission of other documents more than one week later did not contain this information; instead, defense counsel represented that "[t]he accountant has not reconciled the raw data" and thus "this information is not in the Defendant's possession at this time," (Def.'s Doc. Produc. Reqs. at 2).
For its part, Yah Kai has presented no records that represent the actual value of the equipment, goods, and inventory that Napper seized when he evicted Plaintiffs on November 15, 2011. To be sure, Yah Kai is not entirely at fault for this deficiency, because its business records and any pre-seizure inventory of tangible assets remained within the Complex and within Napper's control following his seizure o f the facility in November of 2011. (See Damages Trial Tr. at 32:6-8 (Prince Immanuel).) However, with a potential legal claim against Napper on the horizon, this Court sees no reason why Yah Kai failed to take steps to generate a roughly contemporaneous accounting of its assets (albeit from memory), which would have been a far superior form of evidence than the testimony that Plaintiffs presented at trial regarding the restaurant equipment and other tangible items that Yah Kai had purchased prior to the seizure. (See id. at 31:15-32:8.)
In fairness, this Court also fully acknowledges that the parties' failure to gather and present the kinds of business records that are ordinarily required to generate a reasonably accurate damages calculation in a trademark infringement case stems in large part from their nontraditional beliefs regarding property ownership. See Yah Kai I ,
But the Community's culture is only a partial explanation for the record deficiencies that are apparent in this case; it is also clear that some of the problems are directly attributable to actions of Yah Kai *349and Napper in the context of the instant dispute. For example, Napper served Yah Kai with a notice to vacate the Complex twice before the eviction date-on July 20, 2011, and on October 15, 2011, see Yah Kai I ,
All this means that the instant record provides an exceedingly thin factual foundation upon which to rest this Court's conclusions regarding the monetary damages owed to Plaintiffs. As a general matter, these record deficiencies have broad implications, because a plaintiff generally bears the initial burden of proof regarding damages, and that burden includes establishing the amount of damages owed or gross sales earned by a preponderance of the evidence. See Fishman Transducers, Inc. v. Paul ,
Moreover, and importantly, the Lanham Act grants the factfinder significant discretion to determine the appropriate remedy, see Skydive Ariz., Inc. v. Quattrocchi ,
C. The Particular Factual Bases For This Court's Damages Calculation
With that said, this Court will now undertake to set forth its findings of fact pertaining to its calculation of the monetary damages that Napper owes to Prince Immanuel and Yah Kai as a result of the violations that the Court identified in its liability opinion. In the main, the Court's findings concern: (1) the tangible and intangible assets of Yah Kai that were inside the Complex on the date of the eviction and that were converted when Napper took over the business; (2) the estimated profits that the Restaurant has generated during Napper's infringing use of Prince Immanuel's trademark; and (3) the actual damages Plaintiffs suffered due to Napper's infringement and unfair competition. The Court also addresses certain facts that have not been established in the instant record, and that thus cannot be the basis for other requested remedies such as punitive damages or injunctive relief.
1. Certain Furniture, Equipment, And Other Tangible And Intangible Assets Belonging To Yah Kai Were Present In The Complex When Napper Took Over That Business
When Napper evicted Yah Kai from the Complex on the evening of November 15, 2011, he seized control of all of the furniture, equipment, records, and inventory that was present at the facility on that date, including the food inventory, the food-production equipment, restaurant supplies, administrative supplies and document s, and computers. (See July 15, 2015 Trial Tr. at 102:7-20, 103:4-24 (Prince Immanuel); Damages Trial Tr. at 114:5-11 (Napper).) Yah Kai and other members of the Community attempted to retrieve these items on the night that Napper evicted them in November of 2011, but Napper requested that the police eject them from the premises before Yah Kai's property could be accessed and removed. Yah Kai I ,
The record establishes the following regarding the equipment and inventory that was within the Complex when Napper executed his takeover. A few months prior to Napper's takeover of the Complex, its manager (Yah Kai's president, William Young) had provided information to Yah Kai's accountant about the value of the *351furniture and equipment that Yah Kai had purchased for the Complex. (See Dep. of William Young, Damages Trial Ex. 8 ("Young Dep."), ECF No. 43-4, at 95:22-96:13.) As the president of Yah Kai and the one who made purchases on Yah Kai's behalf, Young would have had the personal knowledge necessary to provide a reasonable estimate of the value of such goods. (See id. at 10:9-10; 17:16-19; 27:13-19.) In other words, Young was an individual "familiar with the condition" of the Complex's equipment and inventory, and thus was "competent to testify as to its value." Checkpoint Foreign Car Serv., Inc. v. Sweeney ,
During the deposition testimony that Young provided in 2014, in the context of this litigation, Young was asked to review a document dated June 27, 2011-titled "balance sheet"-that purportedly listed the value of the "furniture and equipment" within the Complex as $17,864, based on the aforementioned figures that Young had provided to his accountant. (Young Dep. at 96:1, 96:4; see also id. at 95:22-96:8.)
Additionally, because Napper seized certain records that Yah Kai had been storing inside the Complex and used those documents to secure a substantial rebate from the Complex's utility provider (as fully described in the Court's prior memorandum opinion regarding liability, see Yah Kai I ,
2. During Napper's Infringing Use Of The Everlasting Life Trademark, The Restaurant Has Generated Significant Sales And Has Also Incurred Some Costs
Napper reopened the Complex under the name "Everlasting Life Restaurant & Lounge" a few days after Plaintiff's eviction, and he has continued to operate that food-service business ever since. (See Damages Trial Tr. 99:4-6; 113:25-114:24 (Napper).) As the owner of the Everlasting Life trademark, Prince Immanuel formally notified Napper of his ownership of the mark two days before the eviction, and thereby specifically alerted Napper to the prospect of the potential infringement that would arise due to his then-threatened takeover of the business. (See 3d Liability FOF Tbl. at 132 (A, B); Trademark Infringement Notice from Prince Immanuel, Pls.' Liability Trial Ex. 15, ECF No. 29-1.) Prince Immanuel's letter of November 13, 2011 specifically informed Napper that his use of the "Everlasting Life" trademark was unauthorized, and expressly revoked any license to use that mark that Napper may have believed he possessed. (See Trademark Infringement Notice from Prince Immanuel.) Moreover, Napper received and understood this notice, but ignored it. (See Damages Trial Tr. at 99:21-100:20 (Napper).)
*352Thus, Napper's infringing use of Price Immanuel's trademark was entirely knowing; indeed, during the trial, Napper admitted that he had continued to operate the Restaurant in violation of the "Everlasting Life" trademark despite the notice, partly because of his antagonistic personal relationship with Prince Immanuel, who Napper believed "didn't look out for [his] best interest[s]." ( Id. at 100:18; see also id. at 100:13-20.) And even after this Court issued its memorandum opinion finding Napper liable for infringing upon Prince Immanuel's trademark, Napper has persisted in his willful use of the Everlasting Life trademark in connection with his operation of the Restaurant, because he still maintains that he is the rightful owner of the Complex. (See id. at 99:4-17.)
Since Napper's November 2011 takeover of the business, the Restaurant has generated significant (albeit decreasing) gross sales. Between November of 2011 and December 2015, the business had a total "ordinary income" of $3,555,428, which is comprised of $136,475 in November and December of 2011; $1,019,788 in 2012; $1,084,287 in 2013; $771,341 in 2014; and $543,537 in 2015. (See Everlasting Life Restaurant & Lounge Gross Profit, January 2011 through December 2015 ("Everlasting Life Gross Sales Summary") (attached hereto as Appendix B ), ECF No. 105-2, at 1 or B1.) Meanwhile, the business spent $1,232,518 on the goods needed for sales during this same timeframe-specifically, $51,030 in November and December of 2011; $482,464 in 2012; $449,206 in 2013;
3. Napper Genuinely (But Mistakenly) Believes That He Is, And Always Was, The Rightful Owner Of The Business And The Everlasting Life Trademark
Napper's testimony during both the liability and damages trials had one consistent theme: his belief that the Everlasting Life brand and associated food-service business belongs to him. (See, e.g. , July 14, 2015 Trial Tr. at 142:16-23 ("My testimony is that my business, which is the food business that I established in 1995 ... The name [of that business] was Everlasting Life."); Damages Trial Tr. at 99:14-17 ("And Everlasting Life had been my business. I established it, and I established it for the purposes that it serves now, and [the Court's] decision didn't change my heart.").) Make no mistake, in the wake of this Court's decision in Yah Kai I , Napper knew that running the Everlasting Life Restaurant & Lounge violated Prince Immanuel's legal rights. (See Damages Trial Tr. at 100:11 ("I realized what was written on the paper[.]").) But Napper was unwavering in his conviction that his pivotal role in conceiving of and managing the business from its inception conferred upon him the right of ownership, even if the financial equity belonged to someone else and the trademark was registered under someone else's name. (See id. 100:11-13 ("So I realized what was written on the paper, but I knew what was right. And I knew that I was, I was the person who did all of this.").) In other words, Napper has consistently expressed certainty that the business formerly known as "Everlasting Life Health Complex" and its accompanying trademark belongs to him (without regard to the financial stake of Plaintiffs and other Community members), apparently because of a conception of property ownership that differs sharply from the precepts that are recognized under federal and Maryland law. See Yah Kai I ,
Thus, Napper is mistaken. But this Court finds that his mistaken ownership convictions are earnestly and sincerely held, and therefore, Napper's related actions in recovering what he viewed as his own property are not properly characterized as malicious. See Black's Law Dictionary 1101 (10th ed. 2014) (defining "malicious"
*354as meaning "[w]ithout just cause or excuse").
4. The Registration Status Of The Everlasting Life Trademark Is Presently Uncertain
There is no dispute that Prince Immanuel (and, by license, Yah Kai) was the rightful holder of the registered "Everlasting Life" trademark at the time that Napper evicted Plaintiffs and took over the Complex. See Yah Kai I ,
To date, neither of the parties has provided the Court with any notice or other definitive evidence regarding the current status of the registered trademark, and therefore, this Court is not in a position to know whether Prince Immanuel continues to hold the trademark registration, or whether Napper has successfully registered that trademark with the USPTO. Given Napper's mistaken beliefs about legal ownership, as described above, the Court is not inclined to credit Napper's bald statements of present ownership, and without additional evidence, this Court cannot determine which party the USPTO recognizes as holding the registered trademark-a non-finding that has implications for the Court's conclusions regarding injunctive relief. (See Part IV.C, infra. )
IV. CONCLUSIONS OF LAW REGARDING MONETARY DAMAGES AND OTHER REQUESTED REMEDIES
As explained fully below, this Court concludes that Plaintiffs have demonstrated that they are entitled to certain monetary damages but not all of the relief that they have requested in this case. Specifically, the evidence presented establishes that, as a remedy for Napper's willful trademark infringement and unfair competition, Prince Immanuel and Yah Kai are entitled to recover: (1) the profits that Napper generated (i.e., the Restaurant's gross sales minus its expenses) in connection with his operation of the Restaurant during the period of his infringing use of the "Everlasting Life" trademark-which amounts to $1,856,144-(2) their actual damages for Napper's seizure of their business and operation of that entity under the trademarked name "Everlasting Life," which total $545,407; and (3) the yet-to-be-calculated attorney fees and costs that have arisen from this litigation. In addition, Yah Kai has also successfully claimed that it is entitled to compensation for Napper's conversion of its tangible and intangible property interests, in the amount of $142,864, along with $54,434 in prejudgment interest. However, Plaintiffs have not demonstrated any right to punitive damages or injunctive relief for their claims under the Lanham Act or Maryland common law.
Accordingly, this Court will award Plaintiffs $2,401,551 plus attorney fees and costs with respect to Counts I, II, and III; and with respect to Count VI, Yah Kai is awarded a total of $142,864 in compensatory damages and $54,434 in prejudgment interest. Plaintiffs will have the opportunity to file a timely motion for attorney fees *355and costs. No other damages or injunctive relief will be awarded.
A. As A Remedy For Napper's Trademark Infringement And Unfair Competition, Plaintiffs Are Entitled To The Restaurant's Profits From November 2011 To The Present, Their Actual Damages, And Also Attorney Fees And Costs
1. Overview Of The Statutory And Common Law Remedies For Trademark Infringement And Unfair Competition
The Lanham Act provides a number of remedies that a Court may award plaintiffs in cases of trademark infringement or unfair competition. These remedies include various types of monetary damages and the issuance of a permanent injunction. See
[w]hen a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled ... to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.
A nearly identical set of remedies exists for claims of unfair competition under Maryland common law, see Md. Metals, Inc. v. Metzner ,
In addition to the forms of monetary relief mentioned above, the Lanham Act also authorizes district courts to
grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office or to prevent a violation under subsection (a), (c), or (d) of section 1125 of this title.
2. Plaintiffs Have Shown That They Are Entitled To Recover The Restaurant's Profits From November 2011 Through The Present
It is well established that, when making an award of monetary damages under the Lanham Act, a trial judge "should state whether the award is based on [the] defendant's profits, plaintiff's actual damages or both, since each measure depends on different factors." Foxtrap, Inc. ,
For example, before a court may award a plaintiff the defendant's profits, the plaintiff must demonstrate that the defendant acted in "bad faith" or with "willful" disregard of the plaintiff's trademark rights.
*357If a plaintiff establishes that the defendant acted willfully or in bad faith, the court must assess the profits that the defendant earned through the unlawful use of his mark. See Riggs Inv. Mgmt. Corp. v. Columbia Inv. Partners, LLC ,
In the instant case, Plaintiffs focus heavily on the Restaurant's gross sales since November of 2011, requesting that this Court award Plaintiffs the profits that Napper secured as a result of his willful conduct in seizing the Restaurant from Plaintiffs and reopening it under the same trademarked name. (See Pls.' Damages Br. (Pls.' Dam. Br.), ECF No. 100, at 8-14.) This focused effort is warranted, because the record clearly establishes Napper's deliberate disregard for Prince Immanuel's trademark rights, and thus Plaintiffs are entitled to the Restaurant's profits during the period of infringement, which, after an equitable increase, amount to $1,856,144, as explained below.
a. Napper Has Acted With Willful Disregard Of Prince Immanuel's Rights As A Trademark Holder, And Continues To Do So At Present
First of all, as mentioned above, there is no question that Napper's infringement of the "Everlasting Life" mark was-and still is-knowing. Prince Immanuel notified Napper in writing that Prince Immanuel held the federally registered "Everlasting Life" trademark prior to Napper's seizure of the facility and before Napper reopened the Restaurant. (See 3d Liability FOF Tbl. at 132 (A, B); Trademark Infringement Notice at 1.) And Napper has continued to operate the Restaurant under that moniker to date, even after this Court concluded in its liability opinion that his continued use of the mark constitutes trademark infringement. (See 3d Liability FOF Tbl. at 114 (A, B).) Cf. ALPO Petfoods ,
It is also clear to this Court that Napper has engaged in infringing conduct with a "smug willingness" to violate Prince Immanuel's trademark rights, or at least a "callous disregard" for those rights. Foxtrap ,
This conclusion leads the Court to an evaluation of the scope of Napper's willful infringement. The law provides that Napper is liable to Plaintiffs for the profits that the Restaurant generated for the entire period of his infringement, see Riggs II ,
Napper argues that his infringing conduct should not be construed to continue through this present judgment, because Prince Immanuel's trademark registration lapsed in 2016 and was not renewed. (See Damages Trial Tr. at 153:24-154:5.) But that argument misunderstands trademark rights, which are protected both by statute and by common law. It is well established that the termination or cancellation of a federally registered mark does not, in itself, represent the cessation of a priority user's rights in the mark at common law. See, e.g. , McCarthy § 20:40 (noting that cancellation of a registration does not "invalidate state or federal rights in the trademark which do not flow from federal registration"); see also Two Pesos, Inc. v. Taco Cabana, Inc. ,
Here, Napper makes no credible contention that Prince Immanuel's trademark rights at common law should not be recognized because of a lapse in the formal federal registration of the "Everlasting Life" trademark. See Yah Kai I ,
In sum, Prince Immanuel not only notified Napper of his priority interest in use of the mark before the November 2011 eviction, but he has also actively litigated the trademark issue before this Court ever since. Thus, Napper can neither (1) reasonably contend that he was unaware of Prince Immanuel's trademark interests such that he should not be liable for the profits generated from the time the infringement began, nor (2) credibly maintain that Prince Immanuel has abandoned his trademark interests because of his nonuse of the mark. Consequently, Plaintiffs are entitled to an award of the Restaurant's profits from November of 2011 through the present date.
b. Plaintiffs Have Established Estimated Gross Sales Of Nearly $3.6 Million Between November Of 2011 And The Present
This Court concludes that all of the profits that Napper has earned from running the Restaurant are attributable to Napper's infringing use of the Everlasting Life trademark, because Napper took over Plaintiffs' entire business. As this Court found in Yah Kai I , Napper used a trade name that was "virtually identical to Yah Kai's trade name"; ran his business "in the same physical space as the former Complex"; and even retained the Everlasting Life sign that Yah Kai had commissioned and installed outside of the Capitol *360Heights building.
To satisfy their obligation of demonstrating the Restaurant's gross sales during the relevant period, Prince Immanuel and Yah Kai have struggled to compile various financial records (see Pls.' Dam. COL at 13-14), and have proffered the following analysis of how the Court should proceed to account for Napper's infringing profits. Plaintiffs say that, "[r]ather than ... attempting to parse through an intentionally designed, convoluted, commingled puzzle of Fair and Balanced's financial and tax corporate finances, which funds are substantially derived from Everlasting Life," the Court should, instead, "simplify its task consistent with the letter of the law" by (1) aggregating Fair and Balanced LLC's gross sales from 2011 through 2015, which Plaintiffs say is equal to approximately $4.04 million, and then (2) calculate 25% of this gross sales figure ($1.01 million) as a "starting point" for the determination of Plaintiffs' damages, and then (3) "issue treble damages [by] multiply[ing] this amount three [ ] times," for a total award of $3.03 million. ( Id. at 13-14.) This Court agrees that Napper's financial records are "convoluted" and that Plaintiffs' approach is certainly far simpler than undertaking to determine the actual profits that the pertinent business interest generated during the relevant timeframe. ( Id. at 13.) But, alas, Plaintiffs' requested methodology for determining the profits that resulted from Napper's infringing use of their mark is not at all consistent with the letter-or the spirit-of the law.
To avoid being repetitive, the Court directs Plaintiffs' attention to Part VI.A.1 of this Memorandum Opinion, supra , which explains that section 1117 of Title 15 of the U.S. Code specifies the forms of monetary damages that a court may award for Lanham Act violations, as well as the adjustments that a court may make to those damages amounts. Ga.-Pac. Consumer Prods. LP v. von Drehle Corp. ,
Luckily, the record here contains a document that purports to evidence the Restaurant's gross sales between November of 2011 and December of 2015. (See Appendix B at B1.) This document, which Napper's accountant testified that he compiled from his contemporaneous QuickBooks account, shows that the Restaurant generated "[o]rdinary [i]ncome" of $3,555,428 between November 2011 and December 2015-a figure that breaks down to $136,475 for the last two months of 2011 (November and December); $1,019,788 in 2012; $1,084,287 in 2013; $771,341 in 2014; and $543,537 in 2015. In the absence of any other reliable evidence regarding the Restaurant's sales during this period, or any reason to doubt the reliability of these numbers in particular, this Court will rely upon these figures and consider them to represent the Restaurant's gross sales from November of 2011 through December of 2015.
Plaintiffs have also suggested that the applicable gross sales figure for the purpose of determining the Restaurant's profits should include the Restaurant's sales in 2016 (see Pls.' Dam. Br. at 14; Pls.' Dam. COL at 13-14)-and presumably their request would now extend to gross sales for the year 2017 and sales-to-date for 2018, because Napper's infringement is still ongoing. But as explained in Part III.B, supra , this Court has no evidence regarding the sales figures for those years because Napper has not yet produced those records. And given the apparent and significant downward trajectory in the Restaurant's gross sales in the years since Napper has managed the facility (see Appendix B at B1), any estimate of the sales for 2016, 2017, or 2018 that is derived from calculating the average of the gross sales from previous years would likely overestimate the Restaurant's recent sales volume. Thus, this Court is reluctant to reach any conclusion about the Restaurant's gross sales in fiscal years 2016, 2017, and early 2018, and will instead account for this time period by adjusting the overall award of profits as the Lanham Act allows. (See Part IV.A.2.d, infra. )
Consequently, at this point in the analysis, the final gross sales figure encompasses only the documented revenue of the Restaurant between November 2011 and December 2015, and that amount totals $3,555,428.
c. Napper's Costs For Operating The Complex Between November 2011 and December 2015 Were Approximately $2 Million
In order to determine Napper's profits, the expenses that Napper incurred with respect to the Restaurant's operations must be subtracted from the gross sales figure. See
Unfortunately for Napper, this Court has concluded that some of the records he has provided to demonstrate costs are either unreliable, or contain assertions that the listed expenses are not clearly related to Napper's infringing activities. (See Part III.B & n.13, supra (explaining why not all of the costs listed in the documents contained within Appendix A and Appendix C are trustworthy).) With respect to the Itemized Expenses document in particular, the Court expressed its concerns about the commingling of business expenses during the damages trial, and both Napper's accountant and his defense counsel specifically acknowledged those deficiencies, and vowed to address them. (See, e.g. , Damages Trial Tr. at 140:14-141:1 (Edwards) (agreeing it was not possible to identify which expenses were attributable to the Restaurant merely by reviewing the Itemized Expenses document); see also id. at 168:9-15 (Def.'s Counsel) (recognizing the need to "ferret[ ] out [those expenses] that aren't Everlasting Life's expenses" after trial) ). But no subsequent effort was ever undertaken to provide the Court with more reliable figures, much less any theory or formula for calculating the costs of Napper's production of the infringing goods and services. (See e.g. , Damages Trial Tr. at 157:1-158:8 (Def.'s Counsel) (lacking such a theory); Amended Joint Pretrial Statement, ECF No. 99, at 4 (asserting only that "Defendant's profits were d[e] minimis") ). And without any statement regarding which of the listed expenses are actually attributable to the operation of the former Complex business (as opposed to Napper's other business concerns), this Court cannot conclude as a matter of law that the cost listings that Napper has provided prove all of the operating costs he now claims.
But this is not the end of the matter as far as Napper's costs are concerned. Where a defendant in a trademark infringement case has failed to clearly demonstrate the costs attributable to their production of infringing goods, courts in this Circuit have nevertheless routinely considered other available evidence pertaining to a defendant's readily-attributable expenses. See, e.g., Breaking the Chain Found., Inc. v. Capitol Educ. Support, Inc. ,
The accuracy of this document's representation of costs has not been disputed; therefore, this cost figure will be included in the deductions that must be made from the gross sales amounts calculated above in order to determine Napper's profits. Additionally, because the record reflects rent payments that Napper made to Kingdom Management from November 2011 through December 2015 totaling $379,234 (see Part III.C.2., supra ; Appendix A at A6-A7, A10-A11), the Court finds that these payments are directly attributable to *363his infringing use of the mark and should also be subtracted from the Restaurant's gross sales. Finally, as noted in Part III.C.2, supra , the Court has found that two of the documents Defendant submitted provide credible evidence of additional expenses relating to the operation of the Restaurant in the last two years of the infringing period (2014 and 2015)-specifically, $227,210 in 2014, and $223,434 in 2015. (See Part III.C.2. & n.13, supra ; see also Appendix C at C1-C3.) These costs will be deducted as well. Thus, based on the record evidence, the proven expenses for operation of the Everlasting Life Restaurant between November 2011 and December 2015 total $2,062,396.
The Court will use this cost figure to calculate the profits that the Restaurant earned during this timeframe in accordance with the Lanham Act's requirements. See
d. In This Court's Discretion, The Award Of Profits Will Be Increased From $1,493,032 To $1,856,144, To Account For Profits Between 2016 and The Present
The Lanham Act specifically authorizes the modification of an award of profits calculated pursuant to the Act, if the court believes the "amount of the recovery based on profits is inadequate or excessive[,]"
The Court is mindful that any such adjustment should be "careful[ly] tailor[ed,]" Foxtrap ,
Next, the Court will attribute that amount of profits to the years 2016, 2017, and (on a pro-rated basis) 2018, because the Court has no better measure of Defendant's profits for those years, yet the profit generated in those years must be accounted for in the monetary damages award that the Court imposes. When this profit figure, $363,112, is added to the previously calculated profit from 2011 through 2015, the new total award is $1,856,144.
Notably, in making this award of profits for the period from November 2011 to present, this Court rejects Plaintiffs' request for damages in the form of treble profits, which the Lanham Act allows in certain circumstances. (See Pls.' Dam. COL at 3-4, 9-10, 14.) Under the statute, a plaintiff can claim entitlement to an award of treble profits in cases that involve "use of a counterfeit mark[.]" See
No such allegation or evidence has been presented in the instant case. Indeed, although the Court previously concluded that Napper's use of the Everlasting Life moniker was likely to lead confusion on the behalf of the average customer, see Yah Kai I ,
*365(USPTO Service Mark Registration, Pls.' Liability Trial Ex. 1, ECF No. 29-1, at 2; Promotional Events by Fair and Balanced for Everlasting Life, Pls.' Liability Trial Ex. 22, ECF No. 29-1, at 87.)
These images do not come close to meeting the "identical" or "substantially indistinguishable" standard that characterizes a counterfeit mark.
This Court also rejects Plaintiffs' call for it to exercise its discretion under
3. Plaintiffs Are Also Entitled To Attorney Fees And Costs
The Lanham Act authorizes successful plaintiffs to recover their litigation costs in the form of monetary damages, and also, "in exceptional cases [,]" plaintiffs can recover "reasonable attorney fees."
In that case, the Supreme Court interpreted the attorney fees provision of the Patent Act-which has exactly the same language as the attorney fees provision in
Because the language in section 1117(a) is identical to the language that the Supreme Court interpreted in Octane Fitness , the Octane Fitness standard seemingly also applies to requests for attorney fees under the Lanham Act. Indeed, every court of appeals to have considered the relevance of Octane Fitness has concluded that its definition of an "exceptional case" ought to govern the Lanham Act's attorney fees provision. See, e.g., Romag Fasteners, Inc. v. Fossil, Inc. ,
Plaintiffs here are entitled to attorney fees in any event, regardless of Octane Fitness 's effect on the D.C. Circuit's willfulness standard, because Napper's infringing conduct was willful, as explained above, and this case is also undoubtedly extraordinary. To recap briefly, a finding of 'willfulness' or 'bad faith' in the trademark infringement context "require[s] a connection between a defendant's awareness of its competitors and its actions at those competitors' expense"-*367i.e. , it demands that the defendant engaged in "conduct aimed at a victim targeted by the defendant." ALPO Petfoods ,
As is often the case, the final amount of the attorney fees award has not yet been determined, and a motion and further briefing will be necessary to establish the proper scope of the attorney fees award. See AARP v. Sycle ,
B. Plaintiffs Have Demonstrated That They Have Actual Damages, And This Court Will Award $545,407 For Such Damages
Congress has authorized a Lanham Act plaintiff to recover any "actual losses," Foxtrap ,
To recover these actual damages, the plaintiff must provide evidence that "adequately supports all items of damages claimed and establishes a causal link between the damages and the defendant's conduct[.]" ALPO Petfoods ,
In the instant case, Prince Immanuel and Yah Kai have indisputably satisfied the causation aspect of this actual damages analysis. As explained in Yah Kai I , Plaintiffs have proven that Napper engaged in activity that infringed their trademark *368rights, and Napper is thus liable for any losses that the Plaintiffs sustained as a direct result of these actions. See Yah Kai I ,
The question then becomes whether the instant record establishes the extent of the actual harm to Yah Kai and Prince Immanuel. This need not be established to a near certainty, because the D.C. Circuit and other courts have routinely required less rigor when it comes to demonstrating the amount of actual damages the defendant's actions have caused. See ALPO Petfoods ,
The aforementioned holes in the evidentiary record in this case necessitate a "crude measure[ ] of [actual] damages."
Recognizing that the Court must do its best to evaluate actual damages regardless, this Court has scoured the record for credible evidence pertaining to Yah Kai's actual losses. During the liability trial, the parties stipulated to the admission of Yah Kai's corporate income tax returns for the Complex for 2009 and 2010. (See July 14, 2015 Trial Tr. at 9:16-19.) Of the instant trove of financial records, the Complex's *369tax return for 2010 provides the best indication of the Complex's true profits prior to Napper's takeover, and this document indicates that the Complex had profits totaling $161,602 for the year 2010. (See Everlasting Life Health Complex 2010 Tax Return, Pls.' Liability Trial Ex. 9, ECF 114-6, at 1.)
In fact, it is at this point in the actual damages analysis that the Court will pivot away from attempted precision and exercise the discretion that is afforded to the Court under the Lanham Act when the actual harm to a plaintiff is evaluated. See
C. Plaintiffs Have Failed To Show That Punitive Damages Are Warranted, And The Court Will Not Award Injunctive Relief
Unlike Plaintiffs' call for Napper's profit and their actual damages, Plaintiffs' request for punitive damages and injunctive relief cannot be sustained. It is well established that "[p]unitive damages are reserved typically for punishing the most heinous of intentional torts and tortfeasors[,]" see Beall v. Holloway-Johnson ,
Far from displaying malice or evil intent, Napper is, was, and has always been motivated by a sincere-albeit woefully mistaken-belief that he owns Everlasting Life, and that he could therefore rightfully seize the business from Plaintiffs (who he believes wrongfully ousted him) and manage it as his own. As previously stated, this Court has no doubt that Napper's conviction that he is the rightful owner of the business due to his substantial in-kind contributions to the creation and management of the Complex is earnest. See Yah Kai I ,
This means that even though Napper wrongfully and willfully infringed upon the trademark and engaged in unfair business practices with respect to Prince Immanuel and Yah Kai, punitive damages are not appropriate, because the evidence does not support a finding of actual malice under Maryland law. See Food Fair Stores, Inc. v. Hevey ,
Plaintiffs have also failed to establish that they are entitled to an award of injunctive relief. Although the record does make clear that Napper has willfully continued to use the Everlasting Life trademark, Plaintiffs' request for injunctive relief is too vague to be enforced. (See Pls.' Dam. Br. at 6 (asking for "injunctive relief including, but not limited to a ruling that invalidates Napper's continued use of Plaintiffs' trade name"); Pls.' Dam. COL at *3713 (same).) One wonders whether, by requesting "invalidation" of Napper's use of the trade name, Plaintiffs are seeking an injunction that requires Napper merely to change the name of his Restaurant, or are they asking this Court to enjoin Napper's continued operation of the business that is and has always operated under that trade name? Plaintiffs have not provided clarification, such as any proposed language for their requested injunction, and their lack of specificity makes it difficult for the Court to evaluate the scope of the requested injunction, much less order it.
Even more significant is the fact that Plaintiffs have not demonstrated the current status of Prince Immanuel's trademark registration or analyzed its impact on the requested injunctive relief, if any. The record indicates that Prince Immanuel's trademark registration lapsed in 2016, and not only have Plaintiffs ceased to manage any food-service establishment since the 2011 eviction, but Napper is also apparently in the process of applying for registration of substantially the same mark before the USPTO. (See Part III.C.4, supra. ) Thus, the threat of future harm to Prince Immanuel as the trademark owner-which is a requirement for injunctive relief under the Lanham Act (see Part IV.A.1, supra )-is unclear at this time. See ALPO Petfoods ,
D. Yah Kai Is Entitled To Compensatory Damages Plus Prejudgment Interest For Napper's Conversion Of Yah Kai's Tangible Assets And Intangible Rights
Yah Kai not only seeks the aforementioned damages and injunctive relief with respect to Napper's trademark violation and unfair competition, for it has also requested "economic damages, compensatory and punitive damages" as compensation for Napper's conversion of Yah Kai's tangible and intangible property interests when he evicted Plaintiffs from the Complex. (Pls.' Dam. Br. at 1.)
4. Yah Kai Will Be Awarded A Total Of $142,864 As Compensatory Damages For Its Conversion Claim
"In [an] action for conversion, title to the chattel passes to [the defendant], so that he is in effect required to buy it at a forced judicial sale."
*372Staub v. Staub ,
It is the plaintiff's burden to provide the factfinder with a sufficient basis for evaluating the amount of damages for common law conversion. See Owens-Corning v. Walatka ,
Yah Kai also seeks recompense for Napper's conversion of the utility invoices that evidenced Yah Kai's intangible right to a rebate for years of overpayments to PEPCO. (See Pls.' Dam. Br. at 16.) This Court will award that measure of damages as well, because Maryland common law provides that conversion of a physical document evidencing an intangible property right permits recovery of "the value of the right evidenced or represented by the document." Lawson v. Commonwealth Land Title Ins. Co. ,
This Court has already found that Napper's conversion of Yah Kai's business records and utility payment invoices made him liable for "the value of the right evidenced" by those documents, Yah Kai I ,
5. Napper Is Liable To Yah Kai For Prejudgment Interest
Given the conclusions above, the total known value of the tangible and intangible goods that Napper converted was $142,864. However, notably, the value of the converted goods themselves is not the entire amount that is available for recovery under Maryland common law. Maryland law also authorizes plaintiffs to recover interest on the conversion damages, from the time of conversion through the date of judgment. See Keys ,
The fact that prejudgment interest is calculated from the date of conversion under Maryland law means that this Court must determine the date that Napper converted Yah Kai's tangible and intangible property. This is easily done in regard to Yah Kai's tangible property interests, because Napper unquestionably took dominion and control over all of the furniture and equipment that was inside the Complex on November 15, 2011, when he evicted Plaintiffs from the premises. See Yah Kai I ,
The trial record suggests that Napper utilized the invoices that reflected Yah Kai's utility payments to PEPCO between 2009 and 2011 to negotiate a settlement with Kingdom Management at some point between when he extended the existing lease with Kingdom Management (in July of 2011) and when he finalized the settlement with PEPCO (on October 7, 2011). See
In Staub , the Court of Special Appeals upheld a trial court's finding that a defendant father had not converted bonds when he wrongfully added his name to them, nor had he done so when he had the bonds reissued under both his son's and his name. Instead, the Court concluded that the conversion took place only once the father had cashed the bonds and thus deprived his son of the opportunity to do so. See
Prejudgment interest in Maryland is provided for in the Constitution of Maryland, and is calculated at the legal rate of six percent per annum in simple interest. Md. Const. Art. III, § 57 ; see also Sally J.T. Necheles, 13 Maryland Law Encyclopedia Interest and Usury § 14 (Dec. 2017 Update) (noting that the charging of interest under the Maryland Constitution is limited to simple interest). Because Maryland's General Assembly has not enacted an alternative rate, this rate controls. See Great Am. Ins. Co. v. Nextday Network Hardware Corp. , No. 14-1451,
Accordingly, this Court will award Yah Kai prejudgment interest on $125,000 of its conversion damages at the rate of six percent per annum, beginning on October 7, 2011, and continuing through the date of this judgment. That prejudgment interest amount is $47,815. Yah Kai is further awarded prejudgment interest related to Napper's conversion of Yah Kai's tangible equipment and inventory at a rate of six percent per annum from the November 15, 2011 conversion date. The prejudgment interest on the tangible equipment damages amount of $17,864 is $6,619.
6. This Court Will Not Grant Yah Kai Punitive Damages Because Yah Kai Has Not Demonstrated That Napper Acted With Actual Malice
Finally, as has been noted repeatedly above, Plaintiffs cannot obtain punitive *375damages under Maryland's common law unless they demonstrate that Napper acted with actual malice. (See Part IV.A.1, supra ) See also Scott ,
To be sure, this Court's conclusion that "Napper's vision of his rights and entitlements is inconsistent with the law and is not supported by the facts that were established during the trial,"
V. CONCLUSION
For the reasons explained above and in this Court's July 2016 Findings of Fact and Conclusions of Law, and based on evidence presented at both stages of the bifurcated bench trial that has taken place in regard to the instant dispute, this Court concludes that Plaintiffs Prince Immanuel and Yah Kai World Wide Enterprises, Inc. have adequately established their right to certain monetary damages for Defendant Napper's trademark infringement, unfair competition, and common law conversion. Thus, as set forth in the accompanying order, JUDGMENT WILL BE ENTERED IN PLAINTIFFS' FAVOR as follows. With regard to the trademark infringement and unfair competition claims, this Court finds Defendant liable to Plaintiffs in the amount of $2,401,551 based on an accounting of Defendant's profits from infringing goods and Plaintiffs' actual damages, and Plaintiffs are also entitled to attorney fees and litigations costs. Defendant is also liable to Plaintiff Yah Kai for common law conversion in the amount of $142,864, and for prejudgment interest totaling $54,434.
Attachment
APPENDICES
APPENDIX A *376*377*378*379*380*381*382*383*384*385*386APPENDIX B *387*388APPENDIX C *389*390*391--------
The Court rejected Plaintiffs' contention that Napper had usurped a corporate opportunity in violation of Maryland common law. See Yah Kai I ,
The entire corpus of the findings that the parties have proposed to the Court appear in two tables that were completed in several iterations. (See Proposed Findings of Fact, ECF No. 64 ("3d Liability FOF Tbl"); 3d Dam. FOF Tbl.) In the instant Memorandum Opinion, citations to specific material in the tables will reference the row number or numbers in which the material is located, followed by the relevant column or columns, which are designated "A," "B," and "C." Thus, a pincite to "3d Dam. FOF Tbl. at 38-40 (A)" corresponds to lines 38 through 40 under Column A.
The parties submitted most of these documents to the Court in hard copy only and did not file them on ECF. The Court has posted sealed versions of all the financial records that were provided to it in this case that the parties had not previously posted in ECF. (See Pls.' Damages Trial Exs., ECF No. 114.)
Notably, during the damages trial, Napper did specifically testify that approximately 90% of the expenses listed in the Itemized Expenses document (ECF No. 105-1) were incurred with respect to the operation of Everlasting Life. (See Damages Trial Tr. at 115:13-116:2.) But the Court finds this testimony not credible, based on its own review of that document and in light of the bookkeeping practices just described.
The Itemized Expenses document notes payments made to "Dr. Baruch," which is an alias that Napper uses in his dealings with the Community. (See, e.g. , Napper's Facebook Post.)
The most egregious example is "Defendant's Exhibit 1" (see Itemized Expenses, ECF No. 105-1), which is the only document that the defense presented before trial, and which purports to be a comprehensive spreadsheet that lays out the Everlasting Life Restaurant & Lounge's "Expenses By Vendor Detail" from January 2011 through December 2015. Napper has presented the Court with a bound 8 ½ by 11-inch book in portrait orientation-rather than an actual spreadsheet-and thus has rendered virtually incomprehensible data that is ordinarily displayed on the computer across a much wider field and is critical to this case. It appears that defense counsel merely printed off the information sequentially, and made no effort to line up subsequent expense fields with the vendor to whom they relate or otherwise explain how the Court is supposed to access the information, and thus, as the Court explained at trial, this document borders on useless. (See Damages Trial Tr. at 169:20-23.) No correction or update has ever been submitted.
Napper also apparently failed t o assess the equipment and other assets of Yah Kai's that he secured upon his seizure of the facility. Therefore, the record is entirely devoid of specifics regarding the value of most of the tangible goods held within the facility on November 15, 2011. See Yah Kai I ,
This means that members of the Community regularly "assist[ed] other members of the community" financially (Damages Trial Tr. at 89:13-14 (Napper) ), including by pooling their resources and/or offering their time, money, and possessions without expecting compensation. Napper testified that "that was part of our code ... and when somebody was challenged ... we came together collectively and addressed it." (Id. at 89:15-22.) Community members also apparently believe that everything they built, and all of the resources that were brought to the effort, belonged to the Community; therefore, the Community's members did not always document what items or assets belonged to whom as a matter of law. (See, e.g., id. at 88:7-13 (noting that Napper did not document payments the community gave him).)
In one paradigmatic example of the many epic discovery failures that took place in this case, Plaintiffs were forced to call both Napper and another witness back to the stand during the bench trial on liability (after they had previously testified) because Napper had not provided requested documents during the pretrial discovery process. (See Pls.' Mot. to Recall Def. Napper, ECF No. 59, at 1.) The requested documentation was significant, because it revealed a written settlement agreement between Napper and Plaintiffs' landlord, Kingdom Management, regarding a PEPCO rebate-an intangible right to recover on a debt of which Plaintiffs were previously unaware. (See id. ) Similarly, Napper repeatedly failed to produce requested business and tax records, including data identifying gross sales attributable to the Restaurant that did not surface until after the bench trial on damages had concluded. These delays occurred despite Plaintiffs' repeated, urgent requests for exactly this information. (See Pls.' Mot. to Enlarge Discovery, ECF No. 83, at 2 (discussing Defendant's obligation to supplement existing document requests); Pls.' Emergency Mot. for an Order to Show Cause Regarding Darrel Edward's Non-Production of Geoffrey Napper's Tax Return ("Pls.' Emergency Mot."), ECF No. 89; Def.'s Doc. Prod. Requests; see also Damages Trial Tr. at 140:5-13, 142:11-24, 149:2-11 (Edwards) (acknowledging that Plaintiffs had subpoenaed such information, that Defendant had not provided it, and that it would take "[p]robably ... a day" to pull it together).)
The record does not contain the actual balance sheet document, but Young's deposition testimony (which was entered into evidence by consent of the parties because Young is now deceased) specifically identifies and addresses i t. (See Young Dep. at 95:22-96:20 (summarizing the document's contents in response to questioning).)
The Everlasting Life Gross Sales Summary that Defendant provided, attached hereto as Appendix B ) states that the "Costs of Goods Sold" in 2013 was $449,206. Given all of the other years have a negative value for the "Cost of Goods Sold" column, and the value refers to a "Cost[,]" the Court presumes this to be a clerical error and treats the "Costs of Goods Sold" in 2013 as costs that are to be subtracted from ordinary income.
Determining Napper's rental expenses was a tedious and frustrating affair, largely due to the lack of documentation for rental payments for some months. For example, the Itemized Expenses document suggests that Napper did not pay rent in August 2012, March 2015, or September 2015, but, in other months such as October 2013, Napper paid significantly more than the amount due for that month - $10,771.48 instead of the $7,645.63 that appears to have been the typical rent during that time period. (See Itemized Expenses at 96, 299 or Appendix A at A7, A12.) The Court has thus settled on the following approach to arriving at the total cost of actual payments. Relying on the Itemized Expenses document, the Court determined what Napper's rental payments were likely to be for each month, based on the assumption that (1) Napper paid rent every month, and (2) the monthly rent stayed constant from month to month unless there was a rent increase borne out by the next few months. The estimated monthly rent amounts are: $7,000 (November 2011-December 2011); $7,076.97 (January 2012-October 2012); $7,351.13 (November 2012-June 2013); $7,645.63 (July 2013-April 2014); $7,624.67 (May 2014-December 2014); $7,926.93 (January 2015-April 2015); $8,213.65 (May 2015-October 2015); $8,681.02 (November 2015); and $8,531.02 (December 2015). ( See Itemized Expenses 95-96, 298-99 or Appendix A at A6-A7, A10-A11.) Multiplying each of these amounts by the number of months for which that amount was owed and adding up the resulting sums produces the estimated total value of Napper's rental expenses between 2011 and 2015-$379,234.06.
The Court arrived at these operating-expense figures by examining certain documents that Napper provided (see Supplement Itemized Costs and Expenses for Everlasting Life 2014; Supplement Itemized Costs and Expenses for Everlasting Life 2015, both attached hereto as Appendix C ), and excluding certain listed expenses that the Court deemed inaccurate and/or impermissibly included for the purposes of the instant calculation. For example, for 2014, the Court did not consider: the listed payments made for rent or the Costs of Goods Sold (since those expenses had already been accounted for and should not be deducted twice from the business's revenue); "[c]ontractor" expenses (given Napper's habit of compensating himself or his family through these categories); and expenses for "[t]ravel[,]" "[m]iscellaneous[,]" and "gifts" (because it is unclear how those expenses relate to Napper's infringing use). The Court also excluded these same categories of expenses for 2015 for the same reasons (to the extent that the same categories appeared in 2015), the "[r]eimbursement" expenses for the same reason that it did not consider the "[c]ontractor" expenses in 2014, and 2015 expenses for "[c]ashier error" or "[g]ift card payment" in the absence of an explanation of how those expenses were necessary for the production of the Restaurant's goods and services. (See Part IV.A.2.c, infra. )
Congress amended
The Court acknowledges that this cost figure does not include Napper's expenses for running the Restaurant from 2011 through 2013, other than the rental payments that were made and the costs of the goods sold during those years. As this Court has previously noted, the defendant has not provided the Court with a trustworthy accounting of all of the Restaurant's expenses during this two-year period. (See Part III.B, supra. ) Under the Lanham Act's burden-shifting framework, Napper bears the responsibility to prove any costs that he seeks to have deducted from the gross sales figures that Plaintiffs have provided, see
Section 1117(b) provides that:
In assessing damages under subsection [1117(a) ] for any violation of section 1114(1)(a) of this title ... in a case involving use of a counterfeit mark or designation (as defined in section 1116(d) of this title), the court shall, unless the court finds extenuating circumstances, enter judgment for three times such profits or damages, whichever amount is greater, together with a reasonable attorney's fee, if the violation consists of (1) intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark (as defined in section 1116(d) of this title), in connection with the sale, offering for sale, or distribution of goods or services ....
Compare
The Complex's IRS Form 1120 itemizes the total income and various tax-deductible expenses. The Court's profit figure makes certain adjustments that reasonably account for the Complex's actual profit during the relevant period. The Court arrives at the profit amount of $161,602 by taking the Complex's gross income and deducting the costs related to salaries and wages, repairs and maintenance, rents, taxes and licenses, depreciation, and advertising. The Court has also subtracted the value listed for "other deductions," because it is uncertain as to what expenses those deductions actually covered, and they could well have been related to expenses that were necessary to run the business. However, because the line-item pertaining to "charitable contributions" is not even theoretically related to actual cost of operating the Complex, the $125,836 in charitable contributions that the Complex made in 2012 has not been counted as a cost for the purpose of the Court's projections regarding the profit that Yah Kai would have generated if Napper had not evicted Plaintiffs.
As the Court noted in its Findings of Fact and Conclusions of Law at the liability phase of this trial, only Yah Kai has sustained its burden of demonstrating ownership of the converted tangible and intangible assets, as is necessary for entitlement to damages for conversion. See Yah Kai I ,
Napper does not, and cannot, contest that he had access to the business records left in the Capitol Heights facility when Yah Kai was evicted from the premises, nor does he contest that had access to the facility prior to the eviction. Thus, Napper had possession of Yah Kai's tax records, inventories, and the equipment itself, and therefore had the capacity to make a reasonable estimation of the value of the rebate at the time he converted those documents. Indeed, at the time of the lease and rebate negotiations, Napper himself was in a far better position than Yah Kai (and this Court) is now to estimate the value of the intangible rights that he converted. That is, as discussed previously, whatever the actual amount of the overpayment that was being reimbursed, Napper used the invoices for Yah Kai's utilities payments as the basis of the settlement price he negotiated, so t his Court's conclusion that Yah Kai's intangible right to recover for this debt had a value of $125,000 was, in fact, estimated by Napper at the time of the conversion.
To the extent that Napper maintains that the underlying overpayments that were the impetus for the rebate were made by him between 2004 through 2008-in his prior capacity as the Complex's manager before Yah Kai was formed (see, e.g. , Damages Trial Tr. at 167:3-7 (Def.'s Counsel) )-this representation not only reflects Napper's misunderstanding of legal ownership, it is also directly contrary to the testimony that the Kingdom Management representative provided at the liability trial. The witness specifically stated that the overpayment settlement amount was calculated using invoices for approximately "a three-year period ... going into 2011 until we actually separated the meter" (July 15, 2015 Trial Tr. at 88:4-20 (Allen) ). This means that Yah Kai was actually paying the utility bills during the relevant timeframe.
The following appendices contain relevant excerpts of documents discussed in the memorandum opinion and are included to provide the reader with a sense of the financial information the Court had access to in making its determinations.
Reference
- Full Case Name
- YAH KAI WORLD WIDE ENTERPRISES, INC. v. Geoffrey NAPPER
- Cited By
- 11 cases
- Status
- Published