Hairline Creations, Inc. v. Kefalas

• Citation: 664 F.2d 652,212 USPQ 734
• Decision Date: 20 November 1981
• Docket Number: No. 80-2594,80-2594
• Parties: HAIRLINE CREATIONS, INC., Plaintiff-Appellee, v. Diane KEFALAS, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 652

664 F.2d 652

212 U.S.P.Q. 734

HAIRLINE CREATIONS, INC., Plaintiff-Appellee, v. Diane KEFALAS, Defendant-Appellant.

No. 80-2594.

United States Court of Appeals,

Seventh Circuit.

Argued Sept. 22, 1981.

Decided Nov. 20, 1981.

Mark D. Debofsky, Chicago, Ill., for plaintiff-appellee.

Richard Bushnell, Chicago, Ill., for defendant-appellant.

Before SPRECHER and BAUER, Circuit Judges, and DUMBAULD, Senior District Judge. ^*

SPRECHER, Circuit Judge.

The sole issue presented by this appeal is whether a postjudgment motion for attorneys' fees in a trademark case is a motion to alter or amend the judgment governed by Rule 59(e) of the Federal Rules of Civil Procedure, or is a motion for costs governed by Rule 54(d). For the reasons set out below, we hold that such a motion is governed by Rule 59(e) and that the motion below was untimely. Because the motion was untimely, the appeal also was untimely; therefore, this case is dismissed for want of jurisdiction.

I

This trademark action was initiated in November, 1978, by Hairline Creations, Inc. (Hairline), who complained that Diane Kefalas, the owner of Hair Creations, had infringed its trademark in violation of federal trademark laws ¹ and in violation of Illinois statutory ² and common law. Hairline claimed that Kefalas' use of the name "Hair Creations" for her beauty salon generated confusion and constituted false designation of origin in relation to Hairline's trademark, which is used in association with the business of manufacturing and servicing custom hairpieces for men. Kefalas responded that the mark is a generic term which is merely descriptive and cannot acquire a secondary meaning, and that her business was not in competition with Hairline. Kefalas also counterclaimed for a declaratory judgment on the invalidity of Hairline's mark and for abuse of process. The latter claim alleged that Hairline's aggressive defense of its mark was in reality an illegal attempt to use the threat of expensive litigation to extend the reach of the mark beyond the limits granted in the registration. ³ Both Hairline and Kefalas requested attorneys' fees as part of the relief prayed for in their respective claims.

In March, 1979, Hairline moved to dismiss the abuse of process claim for failure to state a claim for relief. The district court denied that motion. In October, 1979, Kefalas moved for summary judgment against Hairline on all of Hairline's claims except for one of the state claims, and for summary judgment in her favor on her claim of the invalidity of the mark. In response, Hairline renewed its motion to dismiss the cause of process claim and, alternatively requested summary judgment in its favor on that claim.

The district court entered a memorandum order and judgment on August 29, 1980, which addressed these motions and constituted a final disposition of the case. The court granted summary judgment in favor of Kefalas on the federal infringement claims. The state infringement claims were then dismissed for want of continuing pendent jurisdiction, and Kefalas' counterclaim of invalidity was dismissed as moot. The court granted summary judgment in favor of Hairline on the abuse of process claim. Each party was directed to bear its own costs.

On September 26, 1980, twenty-eight days after judgment was entered, Kefalas filed ⁴ a motion for attorneys' fees, claiming that this was an exceptional case which merited fees under the federal trademark act, 15 U.S.C. § 1117 (1980). Kefalas stated that the record showed that the infringement claim was without merit, as evidenced by the court's judgment in her favor, and had been prosecuted only to harass and intimidate Kefalas into yielding to Hairline's demand that she change her business name.

Hairline opposed the motion as untimely under Rule 59(e). Hairline argued that the motion for attorneys' fees constituted an effort to amend the judgment and thus was governed by the strict, non-renewable time limit of Rule 59(e) requiring such a motion to be served within ten days from entry of judgment. Kefalas responded that the motion was one for costs under Rule 54(d), which imposes no time limit on such motions. The district court decided that the motion was a Rule 59(e) motion, and therefore was untimely. The court's judgment was entered October 29, 1980, and this appeal was filed November 5, 1980.

II

The question of timeliness in this case turns on the characterization of the motion for attorneys' fees under § 1117. Kefalas argues that the motion is for "costs" and therefore falls under Rule 54(d). ⁵ Because Rule 54(d) imposes no time limit apart from an implicit requirement of reasonableness, Kefalas' motion for attorneys' fees would be timely. Hairline contends, and the district court agreed, that the motion requests alteration or amendment of the judgment, and therefore is governed by Rule 59(e). ⁶ That rule imposes a ten day, nonrenewable time limit for service of motions after entry of judgment. If Rule 59(e) applies, the motion for attorneys' fees clearly was untimely and properly was dismissed.

Rule 54(d) provides for the award of "costs" without defining that term. See generally 6 Moore's Federal Practice P 54.70 (2d ed. 1976); 10 Wright & Miller, Federal Practice & Procedure § 2665 (1973). The rule implicitly embodies the American rule, whereby parties ordinarily cannot recover attorneys' fees as costs. Alyeska Pipeline Services Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975). Thus "costs" are not equivalent to "expenses," but include only such items as court fees and witness fees. ⁷ 10 Wright &amp Miller, Federal Practice & Procedure § 2666 (1973). Because of this limitation, the assessment of costs most often is merely a clerical matter that can be done by the court clerk. The taxing of costs will not delay entry of judgment. Fed.R.Civ.P. 58. In effect judgment and costs are interrelated but can be separately determined.

Rule 59(e) sets out a ten day limit for motions to alter or amend the judgment. See generally 6A Moore's Federal Practice P 59.12 (2d ed. 1979); 11 Wright & Miller, Federal Practice & Procedure § 2817 (1973). Subdivision (e) was added to the rule, which otherwise deals with motions for new trials, in order to make it "clear that the district court possesses the power ... to alter or amend a judgment after its entry." Advisory Committee on Rules for Civil Procedure, Report of Proposed Amendments to Rules of Civil Procedure for the District Courts of the United States, 5 F.R.D. 436, 476 (1946). What constitutes "alteration or amendment" is not defined in the rule. Motions to vacate, to change a dismissal with prejudice to one without prejudice, and to include a trial court's conclusion of law have all been considered as falling under the rule. 6A Moore's Federal Practice P 59.12(1) (2d ed. 1979). While a Rule 59(e) motion is pending, the judgment is suspended. Fed.R.App.P. 4(a). This effect on the finality of the judgment is limited, however, by the prohibition against extending the ten day limit. Fed.R.Civ.P. 6(b). After ten days, alteration or amendment of the judgment is permitted only as provided for by Rule 60, which allows correction of clerical errors anytime, Fed.R.Civ.P. 60(a), and permits substantive relief upon demonstration of extraordinary circumstances, Fed.R.Civ.P. 60(b).

Postjudgment motions for attorneys' fees have not been uniformly governed by one rule; rather, courts have accepted motions for attorneys' fees under both Rule 54(d) and Rule 59(e). Compare Bond v. Stanton, 630 F.2d 1231, 1234 (7th Cir. 1980) (Rule 54(d)) with White v. New Hampshire Department of Employment Security, 629 F.2d 697, 699 (1st Cir. 1980), cert. granted --- U.S. ----, 101 S.Ct. 2313, 68 L.Ed.2d 839 (1981) (Rule 59(e)). The simple explanation for this is that the rules of procedure fail to designate a single niche for attorneys' fees motions. The underlying reason, however, is the diversity of the exceptions to the American rule against the award of attorneys' fees. The exceptions have evolved out of widely varying rationales and include both common law and statutory exceptions. One cannot view attorneys' fees as a single, undifferentiated category. To decide what rule defines postjudgment motions for attorneys' fees requires examination of the nature of the exception under which the fees are claimed and the conditions under which fees are awarded. In this case a statutory exception, 15 U.S.C. § 1117, is the basis for the motion, and therefore must be the focus of the analysis.

III

Section 1117 of Title 15 ⁸ lists the remedies available for violation of the federal trademark statutes. The attorneys' fees provision was added by amendment in 1975, and simply states: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." The provision is distinctive in the remedy scheme because it is discretionary and permits fees to be awarded to either party. The other remedies under § 1117 are available only to successful plaintiffs for protection of their trademarks.

The attorneys' fees provision in § 1117 was specifically designed to counter the effect of the Supreme Court's decision in Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967). The Court held that, absent explicit statutory authorization, attorneys' fees may not be awarded in trademark cases. The Court noted that the American rule provides that attorneys' fees are not to be awarded as costs unless there is a contrary contractual or statutory provision or the case fits one of the narrow, judicially created, equitable exceptions. Id. at 717, 87 S.Ct. at 1406. In Fleischmann no contractual or explicit statutory provision existed to authorize attorneys' fees, and the Court specifically refused to adopt the position that the allowance of "costs" in the existing version of § 1117 could be read to include attorneys'...