Last week, the United States Supreme Court issued a decision in the decades-long dispute over use of the LUCKY trademark on jeans. Lucky Brand Dungarees v. Marcel Fashions Group, No. 18-1086 (May 14, 2020). In 2011, Marcel initiated a third lawsuit between itself and Lucky Brand, alleging Lucky Brand’s use of LUCKY-formative marks infringed Marcel’s GET LUCKY mark. Marcel argued Lucky Brand was continuing to use its marks in ways that contravened an earlier judgment from a second lawsuit between the parties in 2005, which found Lucky Brand infringed Marcel’s trademark by using the phrase “Get Lucky” both alone and in tandem with its LUCKY BRAND mark. Before that, the parties had settled a first lawsuit in 2003 with Lucky Brand agreeing to stop using the phrase “Get Lucky” in exchange for Marcel’s release of any claims targeting Lucky Brand’s use of its own trademarks.
Lucky Brand moved to dismiss the third lawsuit based on Marcel’s 2003 release. The SDNY granted the motion, but the Second Circuit vacated, finding Lucky Brand was precluded from raising the release defense because it had pleaded, but did not further pursue, that same defense in the second lawsuit. The Supreme Court granted certiorari to determine “when, if ever, claim preclusion applies to defenses raised in a later suit.”
The Court rejected so-called “defense preclusion” as a standalone species of res judicata, “unmoored from the two guideposts of issue preclusion and claim preclusion.” The former, also called collateral estoppel, precludes the re-litigation of issues actually decided in a prior suit and necessary to its judgment. The parties agreed it did not apply. By contrast, claim preclusion prevents parties from raising any claim or defense that could have been asserted in an earlier lawsuit between them involving the same cause of action. The Court reasoned that the Second Circuit’s ruling could only stand if the instant suit involved the same cause of action as the second suit in 2005.
Unlike each of Marcel’s former claims in 2005, its claims in this case did not concern any alleged use of the “Get Lucky” phrase. Moreover, the alleged misconduct at issue occurred after the 2005 suit had concluded. Because they lacked a “common nucleus of operative facts,” the two suits did not involve the same cause of action. Therefore, claim preclusion could not apply to bar Lucky Brand’s release defense. The Court reversed the Second Circuit’s ruling.