over dissent, 5th Circuit applies Lanham Act to political speech

Alliance
for Good Government v. Coalition for Better Government, No. 20-30233 (5th Cir. May 19,
2021)

I
sometimes hold out the hope that courts will develop a general treatment of the
First Amendment/Lanham Act interaction. This case suggests that that day, if
possible, is still far off.

The
district court found that the defendant, a nonprofit that endorsed political
candidates, was liable to its counterpart AGG for infringement; joined CBG’s
principal Darleen Jacobs post-judgment; and awarded attorneys’ fees to AGG. The
court of appeals affirms over a dissent that would have held that the First
Amendment precluded application of the Lanham Act to political speech.

Previously,
the district court granted AGG summary judgment and enjoined CBG from using the
latter’s word and composite marks. The court of appeals affirmed but modified
the injunction to restrain only CBG’s use of its composite mark (both parties
apparently used bird logos). Then the district court awarded attorneys’ fees,
which CBG also appealed; the court of appeals found no abuse of discretion in
finding the case exceptional but remanded to adjust the fee award to account
for work related to claims on which AGG didn’t prevail/voluntarily dismissed.

On remand,
Alliance moved to join Darleen Jacobs, a principal of CBG, because it had
learned during post-judgment discovery that CBG lacked resources to pay the fee
award. Jacobs opposed Alliance’s motion for fees, but the district court
ultimately found it appropriate to hold her directly liable. This was
consistent with due process because “[i]t was only after considering Jacobs’s
arguments in opposition that the district court found her liable for the fee
award.” It was also ok to hold her liable for fees under the principle that “[a]n
officer is individually liable for any tortious conduct that he committed in
connection with his corporate duties.” The case was exceptional because CBG “litigated
in an unreasonable manner, including presenting meritless defenses at the
summary judgment stage, filing an unsupported laches defense, meritless
counterclaim, and a meritless motion to dismiss, and behaving unreasonably
during discovery by insisting on proceeding with depositions even after the
district court granted summary judgment.” Jacobs was a principal of CBG and
personally signed the motion for summary judgment, the counterclaim, the motion
to dismiss, and Coalition’s memorandum insisting on proceeding with depositions
after the district court’s summary judgment ruling. So holding her directly
liable was not an abuse of discretion.

CBG
and Jacobs also raised a First Amendment argument “similar to one raised in the
prior two appeals, arguing that the imposition of an attorney fee award would
violate their free speech.” But the First Amendment argument in the first
appeal had not been preserved or ruled on below, and so the court declined to
consider it on appeal. The majority concluded that this discretionary decision
was not clearly erroneous, so the law of the case applied. 

And
here’s the wow moment: “Moreover, even if Coalition’s speech is rightly
considered noncommercial speech, this Court has not previously held that §
32(1) of the Lanham Act, the section at issue here, applies only to commercial
speech.” Footnote: Yes, this court has held that §43(a) applies only to
commercial use, but it has not extended that holding to §32. (Comment: There is
no language in §32 that in any way could be considered broader than §43(a) in
this respect.) Also, the Second Circuit has found that §32 applies to “[a]
political organization that adopts a platform and endorses candidates under a
trade name.” United We Stand Am., Inc. v. United We Stand Am. N.Y., Inc., 128
F.3d 86 (2d Cir. 1997).

Judge
Dennis dissents: “The majority strains at gnats but swallows a camel.” Had the
judge been part of the first appeal, he “would have worked to persuade the
court that applying the Lanham Act to the non- commercial political speech of
Coalition for Better Government is contrary to the Act and violates the First
Amendment.” The law of the case was not an inexorable command. The previous
cases “were predicated on a patent error, i.e., that the Lanham Act can be
constitutionally applied to the noncommercial political speech of a political
organization, such as the political endorsements made by Coalition in this
case.” Further, “misapplying the Lanham Act to noncommercial political speech
creates an anomalous precedent that will beget grave injustice—the imposition
of liability for, and consequent chilling of, the exercise of
constitutionally-protected free speech.”

The
parties principally vet and endorse political candidates vying for local and
state offices. “Neither organization offers or advertises commercial goods or
services. And the speech in which they engage—purely political speech—is at the
core of the First Amendment’s protections.” Meanwhile, the Lanham Act “exclusively
regulates commercial activity and commercial speech.”

The
first appeal determined that First Amendment/commercial speech issues were
waived. This was error: (1) “[I]t is axiomatic that a party can only be liable
for violating a statute if the statute actually applies to the party and its
acts (or omissions)…. [T]here was simply no way for the panel to hold Coalition
liable without it concluding that the Lanham Act may, in its view, validly
constrain noncommercial political speech.” (2) Applying the Lanham Act to noncommercial
political speech infringes on First Amendment free speech rights, violating the
judicial duty to avoid constitutional infirmity of statutes. (3) It was plain
error to hold otherwise, even if CBG didn’t preserve the issue. “[E]ven if no
Fifth Circuit decision squarely holds that the particular provision of the
Lanham Act invoked here is limited to commercial speech, the ‘absence of
circuit precedent does not prevent the clearly erroneous application of
statutory law from being plain error.’” Text, legislative history, and
constitutional avoidance all indicated the right result, as did “the near
uniform holdings of our sister circuits that the Act does not reach
noncommercial speech.” (Extensive discussion of all these things omitted.)

What
about United We Stand? Not only was that a sole outlier in an otherwise
uniform line of cases, it was also incorrect to hold that purely political
speech is a “service” under the Lanham Act. “[S]uch a service is not being
rendered in commerce[;] it is being rendered as part of the political process.”
Tax Cap Comm. v. Save Our Everglades, Inc., 933 F. Supp. 1077, 1081 (S.D. Fla.
1996). In politics, confusing marks have to be addressed by more speech.

The
dissent also didn’t like allowing the district court to add more fees based on
the costs of the appeal, considering that a violation of the mandate in the second
appeal. And, in holding Jacobs personally liable, the court became the first to
allow such liability for a party’s counsel under the Lanham Act. Sanctions for
attorney misconduct should have been applied, if appropriate, instead.

The
majority reasoned that Jacobs could be personally liable because “[a]n officer
is individually liable for any tortious conduct that he committed in connection
with his corporate duties.” The dissent rejoined that this principle “has no
application to an attorney representing her client; attorneys initiate and
prosecute cases at the behest of their clients, but it is the client who
ultimately must decide whether to bring a case. Thus, when the fee-shifting
provision is applied to individuals who were not party to the underlying
litigation, it should be reserved for those who, in their capacity as a
high-level officer or owner of an organization, make a case exceptional.” What
about Jacobs’s leadership role within CBG? The district court expressly cited
her conduct as counsel, not her position within the CBG structure, as rendering
the case “exceptional” and thus justifying imposing liability for the award on
her personally; it never mentioned any actions that she took as an officer or
principal. That wasn’t ok.

Alliance
never attempted to pierce CBG’s corporate veil, and Jacobs was joined only
after the court held that CBG waived its noncommercial speech and First
Amendment defenses. Holding her to that was “highly inequitable, particularly
in light of the clear merit of her constitutional and statutory defenses, which
she has never personally waived…. [T]he majority offers no analysis as to why
Coalition’s litigation choices somehow bind Jacobs personally, and … there was
no finding by the district court that Jacobs controlled Coalition such that its
litigation conduct could be attributed to her.”

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