Baltimore Luggage Co. v. Samsonite Corp.

• Decision Date: 07 December 1989
• Docket Number: Civ. No. PN-86-503.
• Citation: 727 F. Supp. 202
• Court: U.S. District Court — District of Maryland
• Parties: The BALTIMORE LUGGAGE COMPANY v. SAMSONITE CORPORATION.

727 F. Supp. 202

The BALTIMORE LUGGAGE COMPANY v. SAMSONITE CORPORATION.

Civ. No. PN-86-503.

United States District Court, D. Maryland.

December 7, 1989.

Christopher W. Nicholson, and Blum, Yumkas, Mailman, Gutman & Denick, P.A., Baltimore, Md., and A.W. Breiner, Theodore A. Breiner, and Breiner & Breiner, Alexandria, Va., for plaintiff.

David B. Rudow, Paul N. Sameth, and Adelberg, Rudow, Dorf, Hendler & Sameth, Baltimore, Md., and A. Sidney Katz, Patrick G. Burns, and Welsh & Katz, Ltd., Chicago, Ill., for defendant.

Lyn M. Schlitt, James A. Toupin, and George Thompson, for U.S. Intern. Trade Com'n, amicus curiae.

OPINION

NIEMEYER, District Judge.

This case presents the question whether rulings on trademark issues made by the International Trade Commission ("ITC") under 19 U.S.C. §§ 1332 and 1337 are to be given preclusive effect in this litigation under the doctrine of res judicata or collateral estoppel.

When Baltimore Luggage Company introduced a new line of molded luggage, Samsonite contended that the new line infringed Samsonite's trademark rights. Baltimore Luggage initiated this declaratory judgment action and Samsonite initiated an action before the ITC. With respect to some of the issues that were resolved by the ITC, Samsonite has filed a motion to dismiss and for summary judgment on the ground that the doctrine of res judicata applies. A hearing was held on this motion as well as other pending motions on August 4, 1989. Counsel for the ITC were permitted to argue as amicus curiae. The Court has considered subsequent briefs filed by the parties and by the ITC.

For the reasons that are given in this Opinion, Samsonite's motion for summary judgment will be granted.

I PROCEDURAL HISTORY

Because Samsonite bases its motion for summary judgment in part on the doctrine of res judicata, it is necessary to examine the procedural history in some detail.

Baltimore Luggage introduced a new line of molded luggage named "Starfrost" in the fall of 1985. Samsonite contacted Baltimore Luggage in January 1986 to assert that the Starfrost luggage infringed its common-law trademark rights. It demanded that Baltimore Luggage cease the sale of the luggage, provide Samsonite with an accounting of all sales made, and pay damages.

Baltimore Luggage promptly initiated the instant action by filing its complaint on February 13, 1986. In Count I of the three-count complaint plaintiff seeks a declaratory judgment that

Samsonite has no valid trademark rights in any of the items alleged by Samsonite to be infringed; that Baltimore's Starfrost luggage does not infringe any valid trademark of Samsonite; that Baltimore is not unfairly competing with Samsonite under either the statutory or common law through the marketing and sale of the Starfrost luggage; and that Baltimore has not and is not passing off its Starfrost product as a Samsonite product.

In Count II, Baltimore Luggage alleges that Samsonite has attempted to monopolize the molded luggage market and to restrain trade in that market through the unlawful extension of expired patents and through the assertion of trademark rights in unprotectable functional items in violation of antitrust law. Count III is for common law unfair competition.

In its answer, filed on June 23, 1986, Samsonite included four counterclaims for (1) patent infringement in which it alleges that Baltimore Luggage infringed Samsonite's U.S. Patent No. 4,280,247, (2) violation of the Lanham Act, 15 U.S.C. § 1125(a), based on a false designation of source or origin, (3) common law trademark infringement and unfair competition, and (4) violation of the Maryland Consumer Protection Act, Com.Law Art., § 13-101 et seq., Md. Code (1983). Samsonite later added a fifth counterclaim for "passing off" under the Lanham Act, 15 U.S.C. § 1125(a).

While this action was pending Samsonite filed a complaint against Baltimore Luggage and others with the ITC on December 30, 1986. The complaint alleged that the importation of the molded luggage into the United States and its sale here by Baltimore Luggage and the other respondents was a violation of 19 U.S.C. § 1337(a), which then provided:

Unfair methods of competition and unfair acts in the importation of articles into the United States, or in their sale by the owner, importer, consignee, or agent of either, the effect or tendency of which is to destroy or substantially injure an industry, efficiently and economically operated, in the United States, or to prevent the establishment of such an industry, or to restrain or monopolize trade and commerce in the United States, are declared unlawful, and when found by the commission to exist shall be dealt with, in addition to any other provisions of law, as provided in this section.

Baltimore Luggage raised 21 affirmative defenses in response to the complaint, including the defenses that Samsonite had committed antitrust violations and that Samsonite had unclean hands.

The ITC instituted an investigation into this matter on January 29, 1987, styled In the Matter of Certain Hard-sided Molded Luggage Cases, No. 337-TA-262. After a nine-day hearing, the Administrative Law Judge ("ALJ") issued an initial determination and found that Samsonite had no trademark rights in molded luggage because the design was de jure functional, non-distinctive, and had not acquired secondary meaning. The ALJ also found that Samsonite had failed to prove that the importation and sale of the luggage in the United States had the tendency to destroy or substantially injure Samsonite.

The ALJ also made determinations about the defenses raised by Baltimore Luggage. He determined that the evidence in the record did not support the defenses of unclean hands and/or antitrust violation. He stated:

While the administrative law judge has found the mark in issue de jure functional and to lack secondary meaning, he finds that the record does not support a finding of bad faith, inequitable and/or other conduct on the part of complainant Samsonite to warrant a holding of trademark misuse, unclean hands and/or antitrust violation.

Samsonite petitioned the ITC for review of the ALJ's initial determination, and on December 21, 1987, the ITC declined review. Samsonite appealed the decision of the ITC to the Court of Appeals for the Federal Circuit pursuant to 19 U.S.C. § 1337(c) and 19 C.F.R. § 210.71. Baltimore Luggage was permitted to intervene in the appeal but it did not raise or challenge the ALJ's adverse determinations as to its affirmative defenses. The Federal Circuit affirmed the ITC decision on the ground that no tendency to injure an industry had been shown. The court also vacated as moot that part of the ITC decision which related to the unfair competition issues.

Three motions are now pending before the Court. Samsonite has moved for summary judgment on Counts II (antitrust violations) and III (unfair competition) of Baltimore Luggage's complaint, arguing that these actions are barred by the ITC's decision under the doctrine of res judicata. Samsonite has also moved to dismiss Count I (for declaratory judgment) on the grounds that there is no actual case or controversy. Finally, Baltimore Luggage has moved that the Court terminate a stay of proceedings which was entered in this case on December 5, 1988.

II RES JUDICATA

Samsonite's res judicata defense to Counts II (antitrust) and III (unfair competition) is based on the findings by the ALJ that Baltimore Luggage had failed to prove antitrust violations, trademark misuse, or unclean hands.

The doctrine of res judicata serves to "relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication." Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980). The doctrine is applicable when there is "(1) a final judgment on the merits in an earlier suit, (2) an identity of the cause of action in both the earlier and the later suit, and (3) an identity of parties or their privies in the two suits." Nash County Board of Educ. v. Biltmore Co., 640 F.2d 484, 486 (4th Cir.), cert. denied, 454 U.S. 878, 102 S.Ct. 359, 70 L.Ed.2d 188 (1981). The fact that the earlier judgment in this case came from an administrative agency rather than from a court of law does not end the inquiry. The Supreme Court has confirmed that courts may give res judicata effect to judgments of administrative agencies:

Occasionally courts have used language to the effect that res judicata principles do not apply to administrative proceedings, but such language is certainly too broad. When an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate, the courts have not hesitated to apply res judicata to enforce repose.

United States v. Utah Constr. & Mining Co., 384 U.S. 394, 421-22, 86 S.Ct. 1545, 1559-60, 16 L.Ed.2d 642 (1966).

Baltimore Luggage had ample opportunity to litigate its affirmative defenses before the ALJ. As a respondent in the investigation, it was a party, see 19 CFR § 210.4, and as such was entitled to utilize all the discovery procedures provided by 19 CFR §§ 210.30—210.37. It also had the opportunity to cross-examine Samsonite's witnesses. Baltimore Luggage maintains, however, that it took no discovery and presented little evidence on its antitrust and unfair competition affirmative defenses before the ITC—arguing, in effect, that it did not intend to litigate these issues before the ITC. It contends that it decided not to present evidence on these claims because (1) the very claims were pending before this Court in the instant action, (2) the ITC lacked authority to grant Baltimore Luggage affirmative relief, and (3) it believed that it would be successful before the ITC on other grounds. The fact that Baltimore Luggage made a strategic decision not to...