Petitioners Brief — Lucky Brand Dungarees, Inc., et al., Petitioners v. Marcel Fashions Group, Inc.

Supreme Court briefSep 11, 2019

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NO. 18-1086

In the

Supreme Court of the United States

________________

LUCKY BRANDS DUNGAREES, INC., LUCKY BRAND

DUNGAREES STORES, INC., LEONARD GREEN &

PARTNERS, L.P., LUCKY BRAND DUNGAREES, LLC,

LUCKY BRAND DUNGAREES STORES, LLC, KATE

SPADE & CO.,

Petitioners,

MARCEL FASHION GROUP, INC.,

Respondent.

________________

On Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

________________

BRIEF FOR PETITIONERS

________________

DALE M. CENDALI

JOHN C. O’QUINN

Counsel of Record

MATTHEW D. ROWEN

CLAUDIA RAY

KIRKLAND & ELLIS LLP

1301 Pennsylvania Ave., NW

MARY C. MAZZELLO

KIRKLAND & ELLIS LLP Washington, DC 20004

601 Lexington Avenue

(202) 389-5000

New York, NY 10022

(212) 446-4800

dale.cendali@kirkland.com

Counsel for Petitioners

September 11, 2019

QUESTION PRESENTED

In serial litigation between two parties, timetested principles of claim preclusion and issue

preclusion govern when parties may—and may not—

litigate issues that were, or could have been, litigated

in a prior case. This Court has held that, in a

subsequent case between the same parties involving

different claims from those litigated in the earlier

case, the defendant is free to raise defenses that were

not litigated in the earlier case, even though they

could have been. The Federal Circuit, Eleventh

Circuit, and Ninth Circuit have all held the same in

recent years. Their reasoning is straightforward:

Claim preclusion does not bar such defenses, because

the claims in the second case arise from different

transactions and occurrences from the first case, and

issue preclusion does not bar them either, because

they were never actually litigated. The Second

Circuit, however, has now held the opposite. Under

the Second Circuit’s “defense preclusion” rule,

defendants are barred from raising such defenses even

if the plaintiff’s claims are distinct from those asserted

in the prior case and the defenses were never actually

litigated.

The question presented is:

Whether, when a plaintiff asserts new claims,

federal preclusion principles can bar a defendant from

raising defenses that were not actually litigated and

resolved in any prior case between the parties.

PARTIES TO THE PROCEEDING

Petitioners, and defendants below, are Lucky

Brand Dungarees, Inc., Lucky Brand Dungarees

Stores, Inc., Leonard Green & Partners, L.P., Lucky

Brand Dungarees, LLC, Lucky Brand Dungarees

Stores, LLC, and Kate Spade & Co.

Respondent, and plaintiff below, is Marcel

Fashion Group, Inc.

iii

CORPORATE DISCLOSURE STATEMENT

Petitioners Lucky Brand Dungarees, Inc., Lucky

Brand Dungarees Stores, Inc., Leonard Green &

Partners, L.P., Lucky Brand Dungarees, LLC, Lucky

Brand Dungarees Stores, LLC, and Kate Spade & Co.

hereby state:

1. Lucky Brand Dungarees, LLC, converted from

a corporation to a Delaware LLC and concurrently

changed its name from Lucky Brand Dungarees, Inc.

Lucky Brand Dungarees, LLC, is a wholly owned

subsidiary of LBD Intermediate Holdings, LLC, which

is a wholly owned subsidiary of Lucky Brand

Dungarees Parent Holdings, LLC, which is majority

owned by Clover Holdings II LLC, which is wholly

owned by investment funds managed by Leonard

Green & Partners, L.P. No publicly held corporation

owns 10% or more of its stock.

2. LGP Management, Inc., is the general partner

of Leonard Green & Partners, L.P. LGP Management,

Inc., has no parent corporation. No publicly held

corporation owns 10% or more of Leonard Green &

Partners, L.P.

3. Lucky Brand Dungarees Stores, LLC,

converted from a corporation to a Delaware LLC and

concurrently changes its name from Lucky Brand

Dungarees Stores, Inc. Lucky Brand Dungarees

Stores, LLC, is a wholly owned subsidiary of Lucky

Brand Dungarees, LLC. No publicly held corporation

owns 10% or more of its stock.

4. Kate Spade & Company, a Delaware

corporation, was converted on November 3, 2017, and

became Kate Spade & Company LLC. Kate Spade &

Company LLC is a limited liability corporation and a

wholly-owned subsidiary of Tapestry, Inc. Tapestry,

Inc. is a publicly held corporation and has no parent

corporation. Per Schedule 13 G/A filed on February

11, 2019, as of January 31, 2019, the following owned

greater than 10% of Tapestry, Inc. stock: T Rowe Price

Associates, Inc.

TABLE OF CONTENTS

QUESTION PRESENTED .......................................... i

PARTIES TO THE PROCEEDING ........................... ii

CORPORATE DISCLOSURE STATEMENT ........... iii

TABLE OF AUTHORITIES ..................................... vii

INTRODUCTION ....................................................... 1

OPINIONS BELOW ................................................... 6

JURISDICTION ......................................................... 6

STATEMENT OF THE CASE ................................... 6

A. The 2001 Action and the May 2003

Settlement Agreement ................................. 6

B. The 2005 Action and the Resulting Final

Order and Judgment .................................... 8

C. The Current Action, Part One ................... 10

D. The Current Action, Part Two ................... 12

SUMMARY OF ARGUMENT .................................. 15

ARGUMENT ............................................................. 18

The Decision Below Is Contrary To Nearly

150 Years Of This Court’s Precedent................ 18

II. The Decision Below Is Inconsistent With

Time-Tested Principles Of Res Judicata .......... 22

A. Claim Preclusion and Issue Preclusion

Define the Universe of Res Judicata ......... 22

Claim Preclusion .................................... 23

Issue Preclusion ..................................... 23

B. The Second Circuit’s Novel “Defense

Preclusion” Rule Is Antithetical to Both

Claim Preclusion and Issue Preclusion ..... 24

The Second Circuit’s rule is inconsistent

with claim preclusion...................................... 24

The Second Circuit’s rule is inconsistent

with the principles and protections of issue

preclusion ........................................................ 31

III. The Decision Below Is Inconsistent With The

Federal Rules Of Civil Procedure ..................... 34

IV. The Decision Below Would Result In

Unnecessary And Inefficient Over-Litigation

Of Defenses ........................................................ 40

CONCLUSION ......................................................... 48

vii

TABLE OF AUTHORITIES

Cases

Air-Way Elec. Appliance Corp. v. Day,

266 U.S. 71 (1924).................................................. 31

Arizona v. California,

530 U.S. 392 (2000).......................................... 24, 32

Asetek Danmark A/S v. CMI USA Inc.,

852 F.3d 1352 (Fed. Cir. 2017) .............................. 26

Aspex Eyewear, Inc.

v. Marchon Eyewear, Inc.,

672 F.3d 1335 (Fed. Cir. 2012) .............................. 21

B & B Hardware, Inc. v. Hargis Indus., Inc.,

135 S. Ct. 1293 (2015)................................ 14, 24, 42

B & B Hardware, Inc. v. Hargis Indus., Inc.,

569 F.3d 383 (8th Cir. 2009).................................. 45

Baker v. Gold Seal Liquors, Inc.,

417 U.S. 467 (1974)................................................ 35

Balt. S.S. Co. v. Phillips,

274 U.S. 316 (1927)...................................... 3, 20, 32

BellSouth Corp. v. DataNational Corp.,

60 F.3d 1565 (Fed. Cir. 1995) ................................ 43

Bobby v. Bies,

556 U.S. 825 (2009)................................................ 24

Brain Life, LLC v. Elekta Inc.,

746 F.3d 1045 (Fed. Cir. 2014) .............................. 26

Bravo-Fernandez v. United States,

137 S. Ct. 352 (2016)........................................ 31, 32

Clark v. Young & Co.,

5 U.S. (1 Cranch) 181 (1803) ....................... 2, 23, 25

viii

Comm’r v. Sunnen,

333 U.S. 591 (1948)................................ 3, 21, 23, 32

Cooper v. Fed. Reserve Bank of Richmond,

467 U.S. 867 (1984)................................................ 24

Cromwell v. County of Sac,

94 U.S. 351 (1877).......................................... passim

D-1 Enters., Inc. v. Commercial State Bank,

864 F.2d 36 (5th Cir. 1989).................................... 37

Davis v. Brown,

94 U.S. 423 (1877).......................................... passim

Ecolab, Inc. v. Paraclipse, Inc.,

285 F.3d 1362 (Fed. Cir. 2002) .............................. 21

Fayerweather v. Ritch,

195 U.S. 276 (1904)................................................ 33

Foster v. Hallco Mfg. Co.,

947 F.2d 469 (Fed. Cir. 1991) ................................ 22

Golden v. Comm’r,

548 F.3d 487 (6th Cir. 2008)............................ 29, 30

Hallco Mfg. Co. v. Foster,

256 F.3d 1290 (Fed. Cir. 2001) .............................. 21

Holmes Grp., Inc.

v. Vornado Air Circulation Sys., Inc.,

535 U.S. 826 (2002)................................................ 35

Home Depot U.S.A., Inc. v. Jackson,

139 S. Ct. 1743 (2019)............................................ 34

Honda Motor Co. v. Oberg,

512 U.S. 415 (1994).......................................... 33, 34

J.T. Colby & Co. v. Apple Inc.,

2013 WL 1903883 (S.D.N.Y. May 8, 2013) ........... 44

Jim Beam Brands Co.

v. Beamish & Crawford Ltd.,

937 F.2d 729 (2d Cir. 1991) ................................... 45

Kaspar Wire Works, Inc.

v. Leco Eng’g & Mach., Inc.,

575 F.2d 530 (5th Cir. 1978).................................. 23

Keokuk & W. R.R. Co. v. Missouri,

152 U.S. 301 (1894).................................................. 3

Kremer v. Chem. Constr. Corp.,

456 U.S. 461 (1982)................................................ 23

Marine Midland Bank v. Slyman,

995 F.2d 362 (2d Cir. 1993) ................................... 30

McKinnon

v. Blue Cross & Blue Shield of Ala.,

935 F.2d 1187 (11th Cir. 1991).............................. 22

Mercoid Corp. v. Mid-Continent Inv. Co.,

320 U.S. 661 (1944)...................................... 3, 21, 40

Montana v. United States,

440 U.S. 147 (1979)................................................ 46

Morgan v. Covington,

648 F.3d 172 (3d Cir. 2011) ................................... 15

Myers v. Int’l Tr. Co.,

263 U.S. 64 (1923).................................................... 3

Nasalok Coating Corp. v. Nylok Corp.,

522 F.3d 1320 (Fed. Cir. 2008) ........................ 21, 28

Nesbit v. Indep. Dist. of Riverside,

144 U.S. 610 (1892)............................................ 3, 19

New Hampshire v. Maine,

532 U.S. 742 (2001)........................................ passim

North v. Walsh,

881 F.2d 1088 (D.C. Cir. 1989) .............................. 25

Orff v. United States,

358 F.3d 1137 (9th Cir. 2004)................................ 21

Partmar Corp.

v. Paramount Pictures Theatres Corp.,

347 U.S. 89 (1954).................................................. 32

Philip Morris USA v. Williams,

549 U.S. 346 (2007)................................................ 33

Polaroid Corp. v. Polarad Elecs. Corp.,

287 F.2d 492 (2d Cir. 1961) ................................... 43

Postal Tel. Cable Co. v. City of Newport,

247 U.S. 464 (1918).................................................. 3

Regions Hosp. v. Shalala,

522 U.S. 448 (1998)................................................ 31

Reiter v. Cooper,

507 U.S. 258 (1993)................................................ 35

Retractable Techs., Inc.

v. Becton Dickinson & Co.,

842 F.3d 883 (5th Cir. 2016).................................. 26

Russell v. Place,

94 U.S. 606 (1876).................................................. 24

S. Pac. R.R. Co. v. United States,

168 U.S. 1 (1897).......................................... 3, 20, 32

Sea-Land Servs., Inc. v. Gaudet,

414 U.S. 573 (1974).................................................. 2

Smith v. Bayer Corp.,

564 U.S. 299 (2011)................................................ 24

Standefer v. United States,

447 U.S. 10 (1980).................................................. 33

Star Indus., Inc. v. Bacardi & Co.,

412 F.3d 373 (2d Cir. 2005) ................................... 44

Tait v. W. Md. Ry. Co.,

289 U.S. 620 (1933)............................................ 3, 20

Taylor v. Sturgell,

553 U.S. 880 (2008)........................................ passim

Tex. Pig Stands, Inc.

v. Hard Rock Cafe Int’l, Inc.,

951 F.2d 684 (5th Cir. 1992).................................. 45

Times Mirror Magazines, Inc.

v. Las Vegas Sports News, L.L.C.,

212 F.3d 157 (3d Cir. 2000) ................................... 43

Troxell v. Del., Lackawanna & W. R.R. Co.,

227 U.S. 434 (1913)...................................... 3, 20, 32

United States v. Int’l Bldg. Co.,

345 U.S. 502 (1953).................................................. 2

United States v. Moser,

266 U.S. 236 (1924)............................................ 3, 20

United States v. Tohono O’Odham Nation,

563 U.S. 307 (2011).......................................... 23, 38

Valley View Angus Ranch, Inc.

v. Duke Energy Field Servs., Inc.,

497 F.3d 1096 (10th Cir. 2007)........................ 21, 37

Virginia-Carolina Chem. Co. v. Kirven,

215 U.S. 252 (1909)............................................ 3, 20

Werlein v. City of New Orleans,

177 U.S. 390 (1900)................................................ 38

Whole Woman’s Health v. Hellerstedt,

136 S. Ct. 2292 (2016).................................... passim

xii

Wickham Contracting Co.

v. Bd. of Educ. of City of N.Y.,

715 F.2d 21 (2d Cir. 1983) ..................................... 33

Statutes

15 U.S.C. § 1065 ....................................................... 43

28 U.S.C. § 1446(c)(2) ............................................... 35

Rules

Fed. R. Civ. P. 12(a) .................................................. 34

Fed. R. Civ. P. 13(a) ................................ 35, 36, 37, 38

Fed. R. Civ. P. 13(b) ............................................ 35, 36

Fed. R. Civ. P. 13(c) ............................................ 34, 35

Fed. R. Civ. P. 8(a) .................................................... 34

Fed. R. Civ. P. 8(b) .................................................... 34

Fed. R. Civ. P. 8(c) .............................................. 34, 36

Other Authorities

88 A.L.R. 574 (1934) ................................................. 25

Rochelle Cooper Dreyfuss &

Linda J. Silberman, Interjurisdictional

Implications of the Entire Controversy

Doctrine, 28 Rutgers L.J. 123 (1996) .................... 39

Howard M. Erichson,

Interjurisdictional Preclusion,

96 Mich. L. Rev. 945 (1998) ................................... 39

Br. for Defs.-Appellees, Marcel Fashions Grp.

v. Lucky Brand Dungarees, Inc., No. 17-361

(2d Cir. July 10, 2017) ............................................. 8

Br. for the United States, United States v.

Int’l Bldg. Co., No. 508 (U.S. Mar. 23,

1952), 1953 WL 78396 ........................................... 25

xiii

Demand for Jury Trial, Lucky Brand

Dungarees, Inc. v. Ally Apparel

Resources LLC, No. 05 CV 6757 (S.D.N.Y.

July 27, 2005) ........................................................... 8

4 J. Thomas McCarthy, McCarthy on

Trademarks and Unfair Competition

(5th ed. 2018) ......................................................... 43

18 James Wm. Moore et al.,

Moore’s Federal Practice (3d ed. 1999) .................. 28

Restatement (Second) of Judgments

(1980) ...................................................................... 24

Restatement (Second) of Judgments

(1982) .................................................... 33, 28, 39, 46

Wright & Miller et al., Fed. Prac. & Proc.

Juris. (Aug. 2019 Update) ............................... 29, 30

Wright & Miller et al., Fed. Prac. & Proc.

Juris. (3d ed. 2018) .............................. 14, 18, 26, 27

INTRODUCTION

The Second Circuit’s decision in this case is

contrary to more than a century of this Court’s

precedent, the case law of every other circuit to

address this issue, and fundamental principles of

preclusion. Perversely, the Second Circuit’s novel

“defense preclusion” rule would force defendants to

litigate every defense, no matter how peripheral, all

the way to judgment in every case, lest a defense later

be deemed “precluded” in a case where it could

actually make a difference. This Court should reverse

the Second Circuit’s outlier judgment and restore

uniformity to this important area of federal law.

Res judicata contains two distinct components:

claim preclusion and issue preclusion. Taylor v.

Sturgell, 553 U.S. 880, 892 (2008). Claim preclusion

“forecloses ‘successive litigation of the very same

claim.’” Id. (quoting New Hampshire v. Maine, 532

U.S. 742, 748 (2001)). Issue preclusion applies “in the

context of a different claim” barring “‘successive

litigation of an issue of fact or law actually litigated

and resolved in a valid court determination essential

to the prior judgment.’” Id. (emphasis added) (quoting

New Hampshire, 532 U.S. at 748-49).

The two components of res judicata combine in a

straightforward way where, as here, the same parties

find themselves in a subsequent lawsuit dealing with

claims that arise from facts that happened after the

earlier litigation between them. Because a claim

“predicated on events that postdate the” prior case(s)

between parties is by definition not “the very same” as

any claims in any prior case, claim preclusion does not

apply in the later lawsuit. Whole Woman’s Health v.

Hellerstedt, 136 S. Ct. 2292, 2305 (2016); see Clark v.

Young & Co., 5 U.S. (1 Cranch) 181, 181 (1803) (Where

a lawsuit is “upon distinct and different causes of

action” from those at issue in a prior lawsuit “against

the [same] defendant,” “the first cannot be pleaded in

bar of the second.”). And because issue preclusion only

forecloses relitigation of issues that were “resolved” in

and “essential to” the judgment in the prior case, New

Hampshire, 532 U.S. at 748-49, issue preclusion does

not apply to defenses that were not conclusively

adjudicated in the prior litigation. As a result, in a

case like this one involving claims based on alleged

acts that all postdate the prior litigation between the

parties, the defendant is free to raise defenses that

were not conclusively resolved in the parties’ prior

litigation.

These principles are well settled. This Court held

in 1877 that, in “a subsequent action between the

same parties upon a different [claim]” from the one

that was resolved in the first action, defendants are

“only” precluded from raising “matter[s]” that were

“actually at issue and determined in the original

action.” Davis v. Brown, 94 U.S. 423, 428-29 (1877);

see also Cromwell v. County of Sac, 94 U.S. 351, 353

(1877) (“[W]here the second action between the same

parties is upon a different claim or demand, the

judgment in the prior action operates as an estoppel

only as to those matters in issue or points

controverted, upon the determination of which the

finding or verdict was rendered.”). Since then, this

Court has reaffirmed that holding in countless cases.

See, e.g., Sea-Land Servs., Inc. v. Gaudet, 414 U.S.

573, 593 (1974); United States v. Int’l Bldg. Co., 345

U.S. 502, 505 (1953); Comm’r v. Sunnen, 333 U.S. 591,

598 (1948); Mercoid Corp. v. Mid-Continent Inv. Co.,

320 U.S. 661, 671 (1944); Tait v. W. Md. Ry. Co., 289

U.S. 620, 623 (1933); Balt. S.S. Co. v. Phillips, 274

U.S. 316, 319 (1927); United States v. Moser, 266 U.S.

236, 241 (1924); Myers v. Int’l Tr. Co., 263 U.S. 64, 71

(1923); Postal Tel. Cable Co. v. City of Newport, 247

U.S. 464, 474 (1918); Troxell v. Del., Lackawanna &

W. R.R. Co., 227 U.S. 434, 440 (1913); VirginiaCarolina Chem. Co. v. Kirven, 215 U.S. 252, 257

(1909); S. Pac. R.R. Co. v. United States, 168 U.S. 1,

50 (1897); Keokuk & W. R.R. Co. v. Missouri, 152 U.S.

301, 315 (1894); Nesbit v. Indep. Dist. of Riverside, 144

U.S. 610, 618 (1892). And this Court has never once

backed away from that settled law.

That unbroken string of precedent—and the

bedrock preclusion principles from which that

precedent derives—should have supplied the rule of

decision below. Instead, the Second Circuit invented

an entirely new variant of preclusion that is

inconsistent with principles of both claim preclusion

and issue preclusion and is irreconcilable with this

Court’s case law. Adding injury to insult, the Second

Circuit did so in a context (trademark law) where the

novel doctrine it created is particularly inappropriate,

given that the likelihood of confusion between two

marks is uniquely susceptible to shifting outcomes

over time as facts on the ground change. Indeed,

precisely because the scope of trademark rights and

the strength of defenses to trademark-infringement

claims wax and wane over time, defendants in

trademark disputes often have good reasons to raise a

defense in one dispute but not in another brought

earlier or later.

Such is the situation here. The Second Circuit

created its new preclusion rule in the context of a third

successive trademark suit between Lucky and

Marcel. 1 The first suit between the parties, filed in

2001, resulted in a May 2003 settlement agreement

(the “Settlement Agreement”). Pet.App.32-33. The

second suit began in 2005, and ended in 2010 with

judgment in favor of Marcel. Pet.App.42-43. The third

(and current) suit began in 2011, when Marcel sued

Lucky for trademark infringement yet again.

In the current case—which has now gone up to the

Second Circuit twice—Marcel alleges that after the

2005 case ended, Lucky used its own marks in ways

that infringed Marcel’s trademark rights. In the first

appeal in this case, the Second Circuit held that

Marcel’s lawsuit could proceed because all of the

alleged acts underlying Marcel’s claims postdate the

final judgment in the 2005 litigation, and case law

dating back to the Marshall Court holds that claim

preclusion does not apply to such new claims. But in

the second appeal—which Marcel took after Lucky

successfully asserted as a defense on remand the fact

that Marcel’s claims in the current case fall within,

and are thus barred by, the settlement agreement that

resolved the parties’ 2001 lawsuit—an entirely

different panel of the Second Circuit turned a blind

eye to precedent. Rather than follow this Court’s

settled law, the new Second Circuit panel held that

Lucky was “defense precluded” from raising the

1 “Lucky” refers collectively to petitioners Lucky Brand

Dungarees, Inc., Lucky Brand Dungarees Stores, Inc., Leonard

Green & Partners, L.P., Lucky Brand Dungarees, LLC, Lucky

Brand Dungarees Stores, LLC, and Kate Spade & Co.

settlement-agreement defense merely because Lucky

could have litigated that defense to judgment in the

parties’ prior suit, but did not.

The decision below is an extreme outlier, contrary

to time-tested principles of preclusion, irreconcilable

with nearly 150 years of this Court’s case law, and

inconsistent with the law of every other circuit to

address this issue. It is also out of step with the very

policy interests that supposedly justify it. Under the

Second Circuit’s novel rule, defendants will not just

have to raise all defenses—no matter how peripheral

or secondary in a particular case—but litigate them to

final judgment. Otherwise, they risk forever losing

those defenses in future litigation. That will clog

already busy courts by discouraging parties from

streamlining their cases and encouraging (if not

mandating) scorched-earth litigation to the end.

Counsel for defendants will be reluctant to advise

dropping defenses, lest their clients be “precluded” in

some future case and then accuse them of malpractice.

It is difficult to imagine a less efficient regime.

That is particularly true in the context of trademark

disputes, where the strength of claims and defenses

often changes significantly over time. Making matters

worse, the novel use-it-or-lose-it rule applied below

undermines

the

policy

encouraging

private

settlements, as the facts of this case make painfully

clear. Had the Second Circuit followed traditional

preclusion principles, the parties’ settlement

agreement would have barred Marcel’s claims, thus

ending the case. Instead, Lucky has been forced to

spend years needlessly litigating. This Court should

reverse.

OPINIONS BELOW

The Second Circuit’s opinion is reported at 898

F.3d 232 and reproduced at Pet.App.1-22. The district

court’s order granting petitioners’ motion to dismiss,

which the Second Circuit vacated, is available at 2016

WL 7413510 and reproduced at Pet.App.25-38. The

Second Circuit’s earlier opinion in this case is reported

at 779 F.3d 102 and reproduced at Pet.App.39-57. The

district court’s earlier order granting petitioners’

motion for summary judgment, which a different

panel of the Second Circuit vacated, is available at

2012 WL 4450992 and reproduced at Pet.App.58-74.

JURISDICTION

The Second Circuit issued its opinion on August

2, 2018, and denied rehearing on September 19, 2018.

This Court has jurisdiction under 28 U.S.C. § 1254(1).

STATEMENT OF THE CASE

A. The 2001 Action and the May 2003

Settlement Agreement

Lucky sells jeans and other casual apparel at

Lucky Brand stores nationwide. As part of its

business, Lucky owns the federally registered

trademark LUCKY BRAND, along with “other marks

that include the word ‘Lucky.’” However, Lucky does

not own the trademark GET LUCKY, as Marcel

“received a federal trademark registration … for ‘Get

Lucky’” in 1986. Pet.App.40.

After Lucky ran advertisements in the late 1990s

and early 2000s that used the phrase “Get Lucky” in

connection with its products, Marcel sued Lucky in

2001 for trademark infringement and unfair

competition in connection with Marcel’s GET LUCKY

trademark (the “2001 Action”). 2

In May 2003, the parties agreed to end the 2001

Action by entering into the Settlement Agreement.

Lucky agreed to “desist henceforth from use of ‘Get

Lucky’ as a trademark” and to pay Marcel $650,000.

In exchange, Marcel agreed not only to dismiss its

claims in the 2001 Action, but also to release any

claims it had or might have arising out of or relating

to Lucky’s right to “use, license and/or register” the

trademark LUCKY BRAND or any other marks that it

“owned, registered, and/or used” at the time.

Pet.App.34. In particular, the Settlement Agreement

provided that:

Marcel hereby forever and fully remises,

releases, … and discharges [Lucky] from any

and all actions, causes of action … claims,

demands or other liability or relief of any

nature whatsoever, whether known or

unknown, foreseen or unforeseen, … that

Marcel ever had, now has or hereafter can,

shall or may have, by reason of or arising out

of any matter, cause or event occurring on or

prior to the date hereof, including but not

limited to … any and all claims arising out of

or in any way relating to [Lucky’s] rights to

use, license and/or register the trademark

LUCKY

BRAND

and/or

any

other

trademarks,

trade

names,

brands,

advertising slogans or tag lines owned,

2 Marcel’s registration of GET LUCKY was “twice cancelled,”

but the court ruled that it “appears to have been in force in the

relevant periods of this litigation.” Pet.App.40 n.1.

registered and/or used by [Lucky] in the

United States and/or in any foreign country

as of the date of this Agreement.

JA191-92; see also JA188-89 (further “releas[ing]

[Lucky] of any and all actual or potential claims that

Marcel has or might have against [Lucky], including

but not limited to … claims related to or arising out of

the use of the words ‘get lucky’ and ‘lucky’ by

[Lucky]”).

B. The 2005 Action and the Resulting Final

Order and Judgment

Barely a year after the parties signed the

Settlement Agreement, two companies “launched a

‘Get Lucky’ line of jeanswear and sportswear” under a

license from Marcel. Pet.App.41. As Lucky saw it, the

new Marcel-approved product line “slavishly copied

almost every design and style component of genuine

LUCKY BRAND jeanswear and sportswear,”

including “tak[ing] Lucky Brand’s exact logos, designs

and design concepts.” Br. for Defs.-Appellees 10,

Marcel Fashions Grp. v. Lucky Brand Dungarees, Inc.,

No. 17-361 (2d Cir. July 10, 2017) (alteration in

original) (quoting Demand for Jury Trial ¶ 51, Lucky

Brand Dungarees, Inc. v. Ally Apparel Resources LLC,

No. 05 CV 6757 (S.D.N.Y. July 27, 2005)). Lucky

responded by suing the licensees, Marcel, and Marcel’s

president (collectively, “Marcel”) in 2005 in the

Southern District of New York (the “2005 Action”),

claiming that Marcel “had engaged in unfair business

practices” and that the new “Get Lucky” line

“infringed on [Lucky’s] trademarks.” Pet.App.41.

Marcel counterclaimed in the 2005 Action,

alleging that Lucky had engaged in conduct that

infringed not only Marcel’s GET LUCKY mark, but

also various other marks Marcel owned. JA78, 114.

Lucky initially moved to dismiss Marcel’s

counterclaims based on the Settlement Agreement’s

release of “any and all claims arising out of or in any

way relating to [Lucky’s] rights to use, license and/or

other trademarks, trade names, brands, advertising

slogans or tag lines owned, registered and/or used by

[Lucky] … as of the date of this Agreement,” i.e., May

2003.

See JA192.

On the face of Marcel’s

counterclaims, however, it appeared that some of

Lucky’s allegedly-infringing marks were not

registered until after the Settlement Agreement. The

district court accordingly denied Lucky’s motion

without prejudice, as it could not say “that all of

[Marcel’s allegations]” concerned marks covered by

the Settlement Agreement. Pet.App.28. Lucky did not

renew its release defense in the 2005 Action, “and the

case proceeded to a jury trial.” Pet.App.29.

At trial, the jury found that Lucky had infringed

Marcel’s GET LUCKY mark, 3 and the district court

ordered Lucky to pay $300,000 in damages for

infringement and breach of contract. Pet.App.42, 63.

Marcel then sought to enjoin Lucky not only “from

further use of GET LUCKY,” but also from further use

of “the LUCKY BRAND trademarks and any other

“As the Second Circuit noted, the jury’s verdict ‘did not

necessarily mean’ that each of the LUCKY BRAND Marks

infringed Marcel’s GET LUCKY mark.” Pet.App.35. It is thus

far from clear whether the finding of trademark infringement in

the verdict was based on Lucky’s use of GET LUCKY, other

LUCKY-formative marks, or some combination of marks. See

Pet.App.30-31.

trademarks using the word ‘Lucky.’” Pet.App.43.

Lucky objected to that request, which went far beyond

any reasonable interpretation of the jury’s findings

(which centered on GET LUCKY), and Marcel

ultimately dropped it. Pet.App.43. The 2005 Action

thus resulted in a jointly-negotiated and jointlysubmitted Final Order and Judgment, entered on

June 1, 2010, under which Lucky was permanently

enjoined solely from using the GET LUCKY mark (the

“Final Judgment”). Pet.App.29; see Pet.App.71 (the

injunction “does not apply to any marks beyond GET

LUCKY”). That Final Judgment does not address, let

alone reach a final conclusion on, the question of

whether the Settlement Agreement barred some or all

of Marcel’s counterclaims in the 2005 Action.

C. The Current Action, Part One

1. In 2011, Marcel sued Lucky for trademark

infringement again in the Southern District of Florida

(the “Current Action”), seeking a new injunction

prohibiting Lucky from “‘using the LUCKY BRAND

marks,’” which Marcel claimed Lucky had “‘continued

to use’” after the Final Judgment. Pet.App.65 (quoting

JA100-01).

The Current Action was ultimately

transferred to the Southern District of New York,

where the 2005 Action had been litigated. JA135-36. 4

After the Current Action was transferred, Lucky

moved for summary judgment on the ground that the

Final Judgment barred Marcel’s new claims. The

4 In opposing transfer, “Marcel admitted that [the Final

Judgment from the 2005 Action] ‘does not contain specific

injunctive language’” prohibiting Lucky from “‘using its LUCKY

BRAND marks [or] any [other] mark including the word Lucky.’”

Pet.App.70 (quoting JA101-02).

district court agreed and granted summary judgment

to Lucky on all counts. Pet.App.67. It also denied

Marcel’s motion to amend its complaint, ruling that

the Final Judgment “do[es] not prohibit use of the

other Lucky Brand marks or the word Lucky.”

Pet.App.45 (quoting Pet.App.73-74).

2. In an opinion by Judge Leval and joined by

Judges Calabresi and Lynch, the Second Circuit

vacated and remanded in relevant part. Pet.App.3957 (“Marcel I”). 5

Central to Marcel I’s holding was the conclusion

that Marcel’s counterclaims in the 2005 Action were

“for earlier infringements” than Marcel’s claims in the

Current Action. Pet.App.52 (emphasis added). As the

court explained, Marcel’s counterclaims in the 2005

Action were for “infringements that occurred ‘after

May 2003’ but prior to” the Current Action, which

means that they could not have been raised in the 2005

Action. Pet.App.49 (Marcel’s claims in the Current

Action arise out of conduct “that had not yet occurred”

when the 2005 Action ended (emphasis added)). That

meant that Marcel’s claims in the Current Action are

new claims, which in turn means that the Final

5 In the district court, “Marcel had moved to hold [Lucky] in

contempt for violating the injunction issued in the 2005 Action by

continuing to use the ‘Lucky Brand’ marks.” Pet.App.45. “The

district court denied Marcel’s motion on the ground that the

injunction enjoined [Lucky] ‘from using only reproductions,

counterfeits and imitations of the GET LUCKY mark, and d[id]

not prohibit use of the other Lucky Brand marks or the word

Lucky.” Pet.App.45 (alteration in original) (quoting Pet.App.7374). The Second Circuit found “no error, much less abuse of

discretion, in the district court’s denial of the contempt motion.”

Pet.App.54.

Judgment that resolved the 2005 Action “did not bar

[Marcel] from instituting a second suit seeking relief

for alleged further infringements that occurred

subsequent to [that] earlier judgment.” Pet.App.40

(emphasis added). Marcel I accordingly vacated the

district court’s decision. Pet.App.52.

D. The Current Action, Part Two

1. After entry of the mandate, Marcel moved for

leave to amend its complaint. Pet.App.31. The district

court granted that motion and “directed [Marcel] to

specifically identify the marks it accuses of

infringement in its Amended Complaint.” JA137. As

Lucky pointed out, however, Marcel’s initial attempt

to amend its complaint gave little insight into what

exactly its claims in the Current Action were about.

JA137.

Marcel then filed a second amended

complaint, which clarified that Lucky had “registered”

each of the marks Marcel now claims it used in ways

that infringed Marcel’s trademark rights “prior to the

2003 Settlement Agreement” (or were combinations

“of the pre-2003 marks”). Pet.App.32.

In light of that clarification, Lucky moved to

dismiss, as it now was clear that all of the marks at

issue in the Current Action were “registered and/or

used by [Lucky] … as of the date of th[e Settlement]

Agreement,” and thus covered by the Settlement

Agreement’s release. JA142.

Marcel could not meaningfully dispute that its

claims fell within the Settlement Agreement’s plain

language.

Marcel instead argued that “the res

judicata or collateral estoppel effect of [the Final

Judgment]” in the 2005 Action precluded Lucky from

relying on the Settlement Agreement in the Current

Action, merely because the same defense could have

been resolved in the 2005 Action with respect to

different claims. Pet.App.33.

The district court disagreed with Marcel. “Issue

preclusion does not apply, because the applicability of

the Settlement Agreement’s release provision was not

actually litigated and resolved in the 2005 Action.”

Pet.App.35. “Claim preclusion does not apply” either,

because Lucky “is not asserting a claim against

Marcel” and Marcel’s claims in the Current Action are

different from its claims in the 2005 Action.

Pet.App.30, 35. The fact that Lucky did not raise the

settlement defense at trial in the 2005 Action thus

“does not vitiate [the defense] here.” Pet.App.36. The

district court accordingly granted Lucky’s motion to

dismiss. Pet.App.37-38.

2. An all-new Second Circuit panel, comprised of

Judges Walker, Winter, and Pooler, heard Marcel’s

second appeal and vacated and remanded. Pet.App.122 (“Marcel II”).

The Marcel II panel began its opinion by noting

that, as Marcel I held, the claims at issue in the

Current Action “‘could not possibly have been sued

upon’” in the 2005 Action, because they stem from

“alleged infringements that occurred subsequent to the

[Final Judgment] in the 2005 Action.” Pet.App.7

(emphasis added) (quoting Pet.App.48). The Marcel II

panel further noted that there is “no credible issue

preclusion argument,” because the issue of “[w]hether

the Release [in the Settlement Agreement] bars

Marcel’s claims as to post‐settlement agreement

infringement was in no way ‘actually litigated and

determined’ in the 2005 Action.” Pet.App.9 n.3

(quoting B & B Hardware, Inc. v. Hargis Indus., Inc.,

135 S. Ct. 1293, 1303 (2015)). Despite those two

facts—which together proved, under this Court’s

longstanding precedent, that neither claim preclusion

nor issue preclusion applied—Marcel II nonetheless

held that Lucky was “precluded” from raising its

winning defense at all.

According to the Marcel II panel, the Second

Circuit had long “assumed that claim preclusion may

bar a litigation defense,” but had “not had a case in

which [the court] found a defense to be so precluded.”

Pet.App.10. The Marcel II panel recognized that “a

leading treatise,” namely Wright & Miller, instructs

exactly the opposite—i.e., that the defendant in a

second case involving new claims is free to “‘raise

defenses … that were not raised in the first [case],

even though they were equally available and relevant

in both actions.’” Pet.App.11-12 n.4 (quoting 18

Wright & Miller et al., Fed. Prac. & Proc. Juris. § 4406

(3d ed. 2018) (“Wright & Miller”)). But the Marcel II

panel dismissed that instruction as merely “a ‘general

rule,’” which it felt free to disregard based in part on a

separate passage in Wright & Miller ostensibly

suggesting “that perhaps the ‘best rule’ would at times

allow for the preclusion of defenses that could have

been previously asserted.” Pet.App.12 n.4 (quoting

Wright & Miller § 4414). Marcel II thus held as

follows:

In sum, we conclude that defense preclusion

bars a party from raising a defense where:

(i) a previous action involved an adjudication

on the merits; (ii) the previous action involved

the same parties or those in privity with

them; (iii) the defense was either asserted or

could have been asserted, in the prior action;

and (iv) the district court, in its discretion,

concludes that preclusion of the defense is

appropriate because efficiency concerns

outweigh any unfairness to the party whose

defense would be precluded.

Pet.App.19 (emphasis added).

After creating this brand-new test out of whole

cloth, the Marcel II panel went on to hold that “it

would have been an abuse of discretion” for the district

court not to conclude that defense preclusion was

appropriate here, because Lucky could have argued in

the 2005 Action that the settlement barred the claims

there at issue, but “decided to forego the [settlement]

defense at summary judgment.” Pet.App.20-21. The

Marcel II panel did not explain how its holding could

be reconciled with Marcel I, which held that the claims

in the Current Action were not the same as (and thus

were not claim precluded by) the claims in the 2005

Action. Nor did it address any of this Court’s decisions

that reject its unprecedented approach, which Lucky

discussed at length in its brief and raised at argument.

SUMMARY OF ARGUMENT

The decision below turns bedrock principles of res

judicata on their heads. Claim preclusion bars

“successive litigation of the very same claim” by the

very same parties, New Hampshire, 532 U.S. at 748,

but “does not bar claims that are predicated on events

that postdate the filing of the initial complaint.”

Whole Woman’s Health, 136 S. Ct. at 2305 (quoting

Morgan v. Covington, 648 F.3d 172, 178 (3d Cir.

2011)). Claim preclusion thus has no application here,

as Marcel I held and Marcel II recognized that all of

the facts giving rise to the claims now at issue arose

after the parties’ prior litigation ended.

Issue

preclusion, which only bars relitigation of issues that

were “actually litigated and resolved” in a prior case,

Taylor, 553 U.S. at 892, likewise has no application

here, as even the Marcel II panel recognized that

Lucky’s release defense “was in no way ‘actually

litigated and determined’” in the 2005 Action.

Pet.App.9 n.3.

Yet rather than follow those settled principles to

their logical conclusion and affirm the district court’s

dismissal on the basis of Lucky’s winning defense, the

Second Circuit invented a new “defense preclusion”

rule in Marcel II that is inconsistent with claim

preclusion and issue preclusion alike, to strip Lucky of

its winning defense.

Under that novel rule,

defendants may be barred from litigating defenses

that have never been adjudicated (and are thus not

issue precluded) even in the context of claims that

have never been litigated (and are thus not claim

precluded). That result is contrary to basic principles

of res judicata.

It also is contrary to longstanding precedent. For

nearly 150 years, this Court has held that “where the

second action between the same parties is upon a

different claim or demand [from the first], the

judgment in the prior action operates as an estoppel

only as to those matters in issue or points

controverted, upon the determination of which the

finding or verdict was rendered.” Cromwell, 94 U.S.

at 353. In other words, this Court has held that where

claim preclusion does not apply, the only preclusion

available is issue preclusion. Because even Marcel II

recognized that issue preclusion is inapplicable here,

the decision below cannot be sustained.

The Second Circuit’s novel rule is irreconcilable

with the Federal Rules of Civil Procedure as well.

Rule 13 erects a clear distinction between compulsory

counterclaims, which must be asserted at the first

opportunity, and permissive counterclaims, which are

not subject to that strict use-it-or-lose-it rule. Yet,

under the Second Circuit’s novel “defense preclusion”

rule, every defense must be raised and litigated to

judgment, lest they later be deemed barred.

The inevitable consequence of the Second Circuit’s

new rule will be to exacerbate the very “inefficiencies”

that it supposedly weeds out. If it stands, lawyers will

have no choice but to counsel their clients to litigate

every issue no matter how peripheral to the case at

hand, lest the issue later be deemed “precluded” in a

case where it might make a material difference.

Incentivizing over-litigation (on pain of potential

malpractice liability) hardly promotes efficiency.

Finally, even if this Court were inclined to jettison

nearly 150 years of precedent in favor of the Second

Circuit’s novel approach, this would be the very last

context in which to do so. Trademark rights are

distinct from other property rights in that they

regularly wax and wane over time. Because the

likelihood of confusion between marks depends on

extrinsic facts that are constantly changing, a defense

to trademark infringement might be much stronger

(or weaker) today than it was a decade ago. As such,

if ever there were a context where parties should not

be faulted for having decided against litigating every

defense to judgment, it is this one. In all events, the

Second Circuit’s unprecedented approach is wrong not

just for trademark cases, but at every turn.

ARGUMENT

The Decision Below Is Contrary To Nearly

150 Years Of This Court’s Precedent.

In Davis v. Brown, 94 U.S. 423 (1877), this Court

conclusively answered the question presented in this

case. To reverse the decision below, this Court need

go no further than reaffirming Davis.

Davis was the second suit between the same sets

of parties. In the first suit, the plaintiff sued “second

indorsers” of two promissory notes. Id. at 427-28. In

the second suit, the plaintiff sued the same

“indorsers,” but brought claims stemming from ten

different promissory notes. Id. at 424. The indorserdefendants argued in the second suit that they could

not be held liable for their “indorsements” because of

an agreement with the bank that they claimed

shielded them from liability. Id. In other words, they

raised the agreement as a defense to liability. The

plaintiff argued that res judicata barred the

defendants from asserting their agreement with the

bank, because they could have raised that defense in

the first case, but did not. Id. at 428-29.

This Court rejected the Davis plaintiff’s position.

First, the Court explained that “[w]hen a judgment is

offered in evidence in a subsequent action between the

same parties upon a different demand,” 6 the judgment

6 In this context, the term “demand” is synonymous with the

terms “claim” or “cause of action.” Wright & Miller § 4406 (“Three

in first case “operates as an estoppel only upon [a]

matter actually at issue and determined in the original

action.”

Id. (emphases added).

Because the

agreement defense had not been resolved in the first

case, the indorser-defendants remained free to raise it

in the second case, even though they could have done

so in the first case too, because the claims in the second

case were different from those in the first. Id. Second,

the Court rejected the argument that the defendants

should be precluded from raising the defense because

its “validity and efficacy” could have been “litigated

and determined” in the prior case between the parties,

but was not. Id. at 428. As the Court explained, that

argument was “clearly untenable” because it

“confounded the operation of a judgment upon the

demand involved in the action, in which the judgment

was rendered, with its operation as an estoppel in

another action between the parties upon a different

demand.” Id. at 428-29. In modern parlance, Davis

rejected the plaintiff’s position because it conflated

claim preclusion and issue preclusion—just as the

Second Circuit did here in Marcel II.

This Court has since reaffirmed that

straightforward rule more than a dozen times. See,

e.g., Nesbit v. Indep. Dist. of Riverside, 144 U.S. 610,

618 (1892) (“[W]hen [a] second suit” between two

parties “is upon a different cause of action” than the

first suit between the parties, “the judgment in the

former action operates as an estoppel only as to the

point or question actually litigated and determined,

and not as to other matters which might have been

different labels are used to describe the precluded area: ‘claim,’

‘demand,’ and ‘cause of action.’”).

litigated and determined.”); S. Pac. R.R. Co. v. United

States, 168 U.S. 1, 50 (1897) (“[I]f the second action is

upon a different claim or demand, the judgment in the

prior action operates as an estoppel only as to those

matters in issue or points controverted upon the

determination of which the finding or verdict was

rendered, the inquiry in such case being ‘as to the

point or question actually litigated and determined in

the original action, not what might have been litigated

and determined ….’”); Virginia-Carolina Chem. Co. v.

Kirven, 215 U.S. 252, 257 (1909) (“If the second action

is upon a different claim or demand, the bar of the

judgment is limited to that which was actually

litigated and determined.”); Troxell v. Del.,

Lackawanna, & W. R.R. Co., 227 U.S. 434, 440 (1913)

(“[W]here the second suit is upon a different claim or

demand, the prior judgment operates as an estoppel

only as to matters in issue or points controverted and

actually determined in the original suit.”); United

States v. Moser, 266 U.S. 236, 241 (1924) (“[I]n a

subsequent action between the same parties … upon a

different claim or demand,” res judicata applies only

to “point[s] or question[s] … litigated and determined

in the original action.”); Balt. S.S. Co. v. Phillips, 274

U.S. 316, 319 (1927) (“[I]f the second case be upon a

different cause of action, the prior judgment or decree

operates as an estoppel only as to matters actually in

issue or points controverted, upon the determination

of which the judgment or decree was rendered.”); Tait

v. W. Md. Ry. Co., 289 U.S. 620, 623 (1933) (“The scope

of the estoppel of a judgment depends upon whether

the question arises in a subsequent action between the

same parties upon the same claim or demand or upon

a different claim or demand. In the former case a

judgment upon the merits is an absolute bar to the

subsequent action. In the latter the inquiry is whether

the point or question to be determined in the later

action is the same as that litigated and determined in

the original action.”); Mercoid Corp. v. Mid-Continent

Inv. Co., 320 U.S. 661, 671 (1944) (“[W]here the second

cause of action between the parties is upon a different

claim the prior judgment is res judicata not as to

issues which might have been tendered but ‘only as to

those matters in issue or points controverted, upon the

determination of which the finding or verdict was

rendered.’”); Comm’r v. Sunnen, 333 U.S. 591, 598

(1948) (“Since the cause of action involved in the

second proceeding is not swallowed by the judgment

in the prior suit, the parties are free to litigate points

which were not at issue in the first proceeding, even

though such points might have been tendered and

decided at that time.”).

Equally importantly, this Court has never once

cast doubt on the vitality of the rule applied in Davis.

Nor has any other circuit. See Pet.11-16. Indeed, with

the singular exception of the decision below, every

circuit court case (published or unpublished) to

address this issue has agreed with Davis and its

progeny. See, e.g., Aspex Eyewear, Inc. v. Marchon

Eyewear, Inc., 672 F.3d 1335, 1343-44 (Fed. Cir. 2012);

Nasalok Coating Corp. v. Nylok Corp., 522 F.3d 1320,

1326-27 (Fed. Cir. 2008); Valley View Angus Ranch,

Inc. v. Duke Energy Field Servs., Inc., 497 F.3d 1096,

1106 (10th Cir. 2007); Orff v. United States, 358 F.3d

1137, 1142-44 (9th Cir. 2004); Ecolab, Inc. v.

Paraclipse, Inc., 285 F.3d 1362, 1376-77 (Fed. Cir.

2002); Hallco Mfg. Co. v. Foster, 256 F.3d 1290, 129798 (Fed. Cir. 2001); Foster v. Hallco Mfg. Co., 947 F.2d

469, 478-83 (Fed. Cir. 1991); McKinnon v. Blue Cross

& Blue Shield of Ala., 935 F.2d 1187, 1192 (11th Cir.

1991). The reason for that uniformity is simple: The

rule applied in Davis and reaffirmed many times over

is a direct application of the basic rules of claim

preclusion and issue preclusion, and clearly correct.

Davis and its progeny doom the decision below.

The Second Circuit recognized in Marcel II that the

question of whether the Settlement Agreement

released claims that postdated May 2003 was not

resolved in the 2005 Action, which renders issue

preclusion inapplicable. See Pet.App.9 n.3. Claim

preclusion also is off the table, as Marcel I held and

Marcel II admitted that the claims in the Current

Action postdate, and thus are not the same as, the

claims in the 2005 Action. See Pet.App.7, 48. As such,

the decision below cannot be squared with this Court’s

case law on how to apply preclusion principles in the

context of a defense to different claims than those

previously litigated.

II. The Decision Below Is Inconsistent With

Time-Tested Principles Of Res Judicata.

There is a reason this Court’s decisions uniformly

hold that, in a case involving new claims, a defendant

is free to raise defenses that were not previously

adjudicated in prior litigation between the parties:

Any other conclusion would contravene fundamental

principles of res judicata as old as the Republic itself.

A. Claim Preclusion and Issue Preclusion

Define the Universe of Res Judicata.

“The preclusive effect of a judgment is defined by

claim preclusion and issue preclusion, which are

collectively referred to as ‘res judicata.’” Taylor, 553

U.S. at 892. What the Second Circuit dubbed “defense

preclusion,” see Pet.App.14-21, does not exist.

Claim Preclusion

Claim preclusion “refers to the effect of a prior

judgment in foreclosing successive litigation of the

very same claim.” New Hampshire, 532 U.S. at 748.

“Under the[] rules of claim preclusion, the effect of a

judgment extends to the litigation of all issues

relevant to the same claim between the same parties,

whether or not raised at trial.” Kaspar Wire Works,

Inc. v. Leco Eng’g & Mach., Inc., 575 F.2d 530, 535 (5th

Cir. 1978). In short, claim preclusion “puts an end to

the cause of action.” Sunnen, 333 U.S. at 597.

It is fundamental, however, that claim preclusion

applies only as far as the claim that was actually

resolved in the prior case. See, e.g., Clark, 5 U.S. at

193 (Marshall, C.J.) (“a verdict in a prior suit may be

given in evidence as a bar to another suit [only] for the

same cause of action”). And “whether two suits

involve the same claim or cause of action depends on

factual overlap.” United States v. Tohono O’Odham

Nation, 563 U.S. 307, 316 (2011). Thus, claim

preclusion “bar[s] ‘claims arising from the same

transaction,’” but does not bar claims arising from

distinct, albeit related, transactions. Id. (quoting

Kremer v. Chem. Constr. Corp., 456 U.S. 461, 482 n.22

(1982)).

Issue Preclusion

Unlike claim preclusion, issue preclusion “refers

to the effect of a prior judgment in foreclosing

successive litigation of an issue of fact or law actually

litigated and resolved in a valid court determination

essential to the prior judgment, whether or not the

issue arises on the same or a different claim.” New

Hampshire, 532 U.S. at 748-49 (emphasis added).

The requirements for issue preclusion are well

settled. First, the suit must involve “the same issue”

as a prior suit. B & B Hardware, 135 S. Ct. at 129899; see Smith v. Bayer Corp., 564 U.S. 299, 308-12

(2011). Second, the parties must have “actually

litigated” the issue to conclusion in the prior suit.

Bobby v. Bies, 556 U.S. 825, 834 (2009) (quoting

Restatement (Second) of Judgments § 27 (1980)).

Third, the merits of the issue must have been

conclusively “determined” in the prior litigation “by a

valid and final judgment.” Arizona v. California, 530

U.S. 392, 414 (2000). Fourth, the determination of

that issue must have been “essential to th[e]

judgment” in the prior case. Cooper v. Fed. Reserve

Bank of Richmond, 467 U.S. 867, 874 (1984). And

finally, issue preclusion does not apply if “any thing is

left to conjecture as to what was … decided.” Russell

v. Place, 94 U.S. 606, 610 (1876).

B. The Second Circuit’s Novel “Defense

Preclusion” Rule Is Antithetical to Both

Claim Preclusion and Issue Preclusion.

The Second Circuit’s rule is

inconsistent with claim preclusion.

The Second Circuit in Marcel II “view[ed] … the

preclusion of litigation defenses,” which it dubbed

“‘defense preclusion,’” “as consistent with claim

preclusion.” Pet.App.2 n.1; see also Pet.App.8-9 (“the

doctrine of claim preclusion (or, more precisely, defense

preclusion) may be applied in contexts such as this to

bar the litigation of a party’s defense” (emphasis

added)). That is wrong on a number of counts.

As an initial matter, Marcel’s claims in the

Current Action are not the same as its claims in either

of the parties’ prior lawsuits. Pet.App.45-49; see

Pet.App.7. That means claim preclusion simply has

no application here. After all, it has been the law of

the land for at least 200 years that claim preclusion

does not apply where a second case involves a different

claim from the claims at issue in the first case. See,

e.g., Whole Woman’s Health, 136 S. Ct. at 2305-07

(“Petitioners’ postenforcement as-applied challenge is

not ‘the very same claim’ as their preenforcement

facial challenge,” so “the doctrine of claim preclusion

consequently does not bar [the] new challenge ….”);

Clark, 5 U.S. at 181 (where a suit is “upon distinct and

different causes of action” from the claims at issue in

a prior suit, “the first cannot be pleaded in bar of the

second”); Br. for the United States 26, United States v.

Int’l Bldg. Co., No. 508 (U.S. Mar. 23, 1952), 1953 WL

78396 (describing as “fundamental” the rule that

claim preclusion does not apply “‘to matters arising in

a [second] suit upon a different cause of action’”

(quoting Cromwell, 94 U.S. at 353)); 88 A.L.R. 574

cmt. n. (1934) (“[A] judgment can never operate as a

bar of a different cause of action.”).

To be sure, “claim preclusion … operates ‘not only

as to every matter which was offered and received to

sustain or defeat the claim or demand, but as to any

other admissible matter which might have been

offered for that purpose.’” North v. Walsh, 881 F.2d

1088, 1093 (D.C. Cir. 1989) (R.B. Ginsburg, J.)

(quoting Cromwell, 94 U.S. at 352)). But, again, that

ordinary incident of claim preclusion applies only

where claim preclusion applies. And, again, claim

preclusion is off the table here given Marcel I’s holding

(and Marcel II’s recognition) that the claims in the

Current Action are different from the claims in the

2005 Action because the alleged acts giving rise to

them occurred after the 2005 Action ended. See Davis,

94 U.S. at 428-29; see also Whole Woman’s Health, 136

S. Ct. at 2305 (claim preclusion does not apply to

claims “predicated on events that postdate” the

parties’ prior case); Asetek Danmark A/S v. CMI USA

Inc., 852 F.3d 1352, 1365 (Fed. Cir. 2017) (“[T]he

difference in timing means that the two situations do

not involve the same ‘claim’ for claim-preclusion

purposes, even if all the conduct is alleged to be

unlawful for the same reason.”); Retractable Techs.,

Inc. v. Becton Dickinson & Co., 842 F.3d 883, 898-99

(5th Cir. 2016) (judgment on product disparagement

claim did not preclude action for false advertising

based on continuation of same advertising claims);

Brain Life, LLC v. Elekta Inc., 746 F.3d 1045, 1053-54

(Fed. Cir. 2014) (claim preclusion does not extend to

“acts of alleged infringement occurring after entry of

the final judgment” in the prior case).

Marcel II disagreed with that conclusion, insisting

that a “leading treatise” (namely, Wright & Miller)

suggests that “the ‘best rule’ would … allow for the

preclusion of defenses that could have been previously

asserted.” Pet.App.11 n.4 (quoting Wright & Miller

§ 4414). But Wright & Miller could not be clearer

about what the law is and has been since at least the

1870s. Indeed, the very section Marcel II cited states

unequivocally that “the rule that [applies] in

successive actions growing out of different

transactions” is “simple”: “the defendant is free to raise

defenses that were equally available but omitted from

the first action.” § 4414 (emphasis added). Every

other section of the treatise that mentions this issue

likewise expounds the same “simple,” time-tested rule.

See, e.g., § 4406 (“If the second lawsuit involves a new

claim or cause of action, the parties may raise

assertions or defenses that were omitted from the first

lawsuit even though they were equally relevant to the

first cause of action.”); § 4407 (“To the extent that a

different claim or cause of action is involved [in a

second action between the parties], the parties are free

to advance new matters without regard to the role that

the new matters might have played had they been

advanced in the first action.”).

Wright & Miller does muse, in the final paragraph

of the section Marcel II quoted (after setting out what

the law actually is), that “[p]erhaps the best rule

would be that no defenses are precluded by default of

the first action, but that a defendant who wishes to

litigate the first action must give notice of any

currently available defenses that he wishes to hold

free for another day.” § 4414. But Wright & Miller

never once suggests that courts should jettison 150

years of precedent. That should come as no surprise,

as adopting the above-quoted proposal wholesale

would fundamentally reshape the rules of res judicata.

After all, if “no defenses are precluded by default of the

first action” in any case, then affirmative claim

preclusion would all but cease to exist. That likely

explains why the furthest Wright & Miller ever goes is

to suggest that its radical proposal might make sense,

if at all, only in “settings such as installment

payments of rent, serial obligations to pay interest and

principal, or the like, [where] a plaintiff may

necessarily acquire multiple claims out of a single

transaction.” Id. But, again, this is not such a case—

as Marcel I held and Marcel II acknowledged, the

claims at issue in the Current Action all arise out of

different transactions than did the claims in the

parties’ prior litigation.

Nor is it accurate to say, as Marcel likely will, that

other treatises or cases apply the concept of “defense

preclusion” as the Marcel II panel did here. Cases and

secondary sources do recognize that “a defense that

could have been interposed [in a first lawsuit] cannot

later be used [in a second lawsuit] to attack the

judgment of the first action.” Nasalok, 522 F.3d at

1328 (emphasis added) (citing Restatement (Second)

of Judgments § 18(2) (1982)); see also, e.g., 18 James

Wm. Moore et al., Moore’s Federal Practice § 131.02(2)

(3d ed. 1999) (“A collateral attack on a judgment or

order will fail if the party making the attack could

have raised the issue in the other action.”). But, again,

that is just the ordinary application of claim

preclusion to prevent a collateral attack on a

previously decided claim—and no one is doing that

here. To the contrary, Lucky merely seeks to assert a

defense to new claims. As such, unlike in the

collateral-attack context, a decision for Lucky in this

case that the release defense bars Marcel’s current

claims would in no way alter the relief Marcel

obtained on its prior claims in the Final Judgment

that resolved the 2005 Action. That indisputable fact

exposes the Second Circuit’s novel rule for what it is:

an unprincipled departure from the time-tested

limitations on res judicata.

Nor is the Current Action a lawsuit to enforce the

Final Judgment that resolved the 2005 Action.

According to the panel in Marcel II, “Marcel styled its

complaint as one that effectively sought to enforce the

judgment entered in the 2005 Action.” Pet.App.21.

But how Marcel described its complaint is not what

matters. What matters is whether the Current Action

actually seeks to obtain relief to which Marcel is

entitled pursuant to the Final Judgment, or whether

the Current Action seeks to obtain additional relief

that could not have been awarded in the 2005 Action.

And on that score, the facts—not to mention the law

of the case—could not be clearer: As Marcel I held and

Marcel II acknowledged, Marcel’s claims in the

Current Action “‘could not possibly have been sued

upon in the previous case’” (i.e., the 2005 Action),

because they arise from “alleged infringements that

occurred subsequent to the judgment in the 2005

Action.” Pet.App.7 (quoting Pet.App.48). 7

That the Current Action is not a judgmentenforcement action is particularly evident when one

contrasts the facts here with the facts of cases that are.

For instance, in Golden v. Commissioner, 548 F.3d 487

(6th Cir. 2008) (cited at Wright & Miller § 4414 n.39),

the second suit was a “levy action” brought by the IRS

“to collect on [income-tax] deficiencies” that were

finally adjudicated in the IRS’s favor in an earlier tax

7 Consistent with Marcel II’s incorrect characterization of the

Current Action as a lawsuit brought merely to enforce the Final

Judgment that resolved the 2005 Action, the most recent update

of Wright & Miller cites the decision below in a footnote as a case

involving “direct enforcement of a judgment.” See Wright &

Miller § 4414 & n.39 (Aug. 2019 Update). But, as noted supra,

that is simply incorrect—as the Marcel II panel itself recognized,

Marcel’s claims in the Current Action arise out of facts that

postdate the claims in the 2005 Action. See Pet.App.7 (citing

Pet.App.48).

court proceeding. Id. at 489. All the second suit

sought, in other words, was to collect on what the first

proceeding held the taxpayers owed the IRS. The first

action

merely

“stipulated”

the

taxpayers’

“deficiencies”; it did not order any relief, which is why

the IRS brought the levy action. Id. But that is not at

all like this case. Again, critical to the holding in

Marcel I was the fact that “Marcel could not lawfully

have been awarded” in the 2005 Action the “damages”

that it seeks in the Current Action. Pet.App.49. In

other words, the Final Judgment that resolved the

2005 Action did not entitle and could not have entitled

Marcel to the relief it now seeks.

Nor is this case at all like Marine Midland Bank

v. Slyman, 995 F.2d 362 (2d Cir. 1993) (cited at Wright

& Miller § 4414 n.39). The first suit in that case

resulted in summary judgment “entered against the

Slymans’ wholly owned corporation” and “in favor of

Marine,” as the court held that the Slymans’

corporation was $124,818.66 in arrears. Id. at 363-64.

Despite that judgment, which was entered in state

court, the corporation did not pay. Marine then

brought a second suit in federal court against the

Slymans themselves, demanding payment of the

amount the first suit held the corporation owed, “plus

interest, attorney’s fees, and costs.” Id. at 364. The

second suit, in other words, was the quintessential

judgment-enforcement action, brought to collect from

privies to an earlier judgment money to which a first

court held the plaintiff was entitled. The Current

Action here is entirely different. Unlike in Marine’s

second suit (or any other judgment-enforcement

action), Marcel seeks no relief in the Current Action

that it could have obtained in the 2005 Action, as

Marcel I made clear. See Pet.App.49-50. To the

contrary, in the Current Action Marcel seeks

“damages for subsequent infringements.” Pet.App.50.

In sum, in light of the holding of Marcel I that the

claims at issue here are for new acts of alleged

infringement that seek new relief that Marcel could

not have obtained in the 2005 Action, not only is this

case not a judgment-enforcement action, but there is

simply no way to reconcile the holding of Marcel II

with basic, time-tested principles of claim preclusion.

The Second Circuit’s rule is

inconsistent with the principles and

protections of issue preclusion.

In addition to being antithetical to claim

preclusion, Marcel II’s novel holding also distorts issue

preclusion, which dictates that “the judgment in the

prior action operates as an estoppel only as to those

matters in issue or points controverted, upon the

determination of which the finding or verdict was

rendered.” Cromwell, 94 U.S. at 353. When tested “by

its substance—its essential and practical operation—

rather than its form or local characterization,” AirWay Elec. Appliance Corp. v. Day, 266 U.S. 71, 82

(1924), it becomes clear that what Marcel II dubbed

“defense preclusion” is actually best understood as

issue

preclusion—minus

its

essential

and

constitutionally-rooted protections.

This Court has repeatedly explained that issue

preclusion only “bars relitigation of an issue of fact or

law raised and necessarily resolved by a prior

judgment.” Bravo-Fernandez v. United States, 137 S.

Ct. 352, 358 (2016); accord, e.g., Regions Hosp. v.

Shalala, 522 U.S. 448, 463-64 (1998); Partmar Corp.

v. Paramount Pictures Theatres Corp., 347 U.S. 89, 91

(1954); Sunnen, 333 U.S. at 598; Balt. S.S. Co., 274

U.S. at 319; Troxell, 227 U.S. at 440.

That

fundamental limitation renders issue preclusion a

nonstarter here. After all, even the Marcel II panel

recognized that “[w]hether the Release bars Marcel’s

claims as to post‐settlement agreement infringement

was in no way ‘actually litigated and determined’ … in

the 2005 Action.” Pet.App.9 n.3 (citation omitted); see

also Pet.App.20 (recognizing that Lucky did not “fully

litigate[] the release defense in the 2005 Action”);

BIO.2 (admitting that Lucky “never pursued” the

release defense in the 2005 Action).

Marcel II nonetheless held that an issue never

before adjudicated could be precluded in the context of

a claim never before litigated—or, in other words, that

Lucky’s release defense was issue precluded even

though it was never decided in any prior litigation.

That result is fundamentally inconsistent with timetested principles of issue preclusion. As this Court has

held time and again, issue preclusion applies only to

issues that have been conclusively “determined” in

prior litigation “by a valid and final judgment.”

Arizona, 530 U.S. at 395; see, e.g., S. Pac. R.R. Co., 168

U.S. at 47-49 (no issue preclusion where court did not

render any final determination on issue).

Nor can it be argued that the issue-preclusion

requirements that Marcel II bypassed are somehow

peripheral, such that they may be cast aside whenever

a court deems it efficient. “[P]reclusion doctrine is

premised on ‘an underlying confidence that the result

achieved in the initial litigation was substantially

correct.’” Bravo-Fernandez, 137 S. Ct at 358 (quoting

Standefer v. United States, 447 U.S. 10, 23 n.18

(1980)); see Restatement (Second) of Judgments § 29

cmt. f.

The actual-litigation and actual-decision

requirements are critical to that confidence, as they

ensure both adversarial presentation of issues by the

parties and reasoned decisionmaking by the court.

Wickham Contracting Co. v. Bd. of Educ. of City of

N.Y., 715 F.2d 21, 28 (2d Cir. 1983).

More fundamentally, the actual-litigation and

actual-decision requirements are of constitutional

import. See Fayerweather v. Ritch, 195 U.S. 276, 30709 (1904). The basic guarantee of due process in this

context is that defendants will not be deprived of their

property without a meaningful opportunity to contest

all elements of liability and raise all affirmative

defenses. Philip Morris USA v. Williams, 549 U.S.

346, 353 (2007); see Honda Motor Co. v. Oberg, 512

U.S. 415, 430 (1994) (due process protects against

“arbitrary and inaccurate adjudication”).

Issue

preclusion’s actual-litigation and actual-decision

requirements are critical safeguards of that

guarantee. That is why there is no due process

problem to precluding an issue where a plaintiff can

show that the issue was “actually litigated and

resolved” against the defendant through “a valid court

determination essential to [a] prior judgment.”

Taylor, 553 U.S. at 892. In that case, the court can be

certain that the defendant had a full and fair

opportunity to prevail on these issues—and

unambiguously lost. But precisely because these

requirements help protect against arbitrary and/or

inaccurate deprivations of property, they may not be

cast aside merely because a court believes it would be

“efficient” to do so.

Nor can there be any question that the issuepreclusion principles Marcel II bypassed below are

well established. As noted, see supra pp.18-22, this

Court has applied the actual-litigation and actualdecision requirements in an unbroken string of cases

dating back to the 1870s. That alone dooms the

Second Circuit’s novel rule. See Oberg, 512 U.S. at 430

(due process protects against the “abrogation of a wellestablished common-law protection”). In sum, there is

simply no way to reconcile the decision below with

basic principles of res judicata.

III. The Decision Below Is Inconsistent With The

Federal Rules Of Civil Procedure.

In addition to flouting nearly 150 years of settled

precedent and fundamental principles of preclusion,

the decision below is inconsistent with the Federal

Rules of Civil Procedure. Under the Second Circuit’s

novel “defense preclusion” rule, all defenses are given

the preclusive effect of compulsory counterclaims,

even when they are not counterclaims at all.

1. The Federal Rules have long distinguished

between claims, defenses, and counterclaims. First, a

“claim” is a legal entitlement to relief that a plaintiff

“states” in its initial “pleading.” Fed. R. Civ. P. 8(a).

Second, a defense is a fact or argument that a

defendant asserts “[i]n responding to a pleading,” Fed.

R. Civ. P. 8(b)-(c), and that if true will “diminish or

defeat the recovery sought by the [plaintiff],” Fed. R.

Civ. P. 13(c). Third, a “counterclaim” is a legal

entitlement to relief asserted by a defendant. See

Home Depot U.S.A., Inc. v. Jackson, 139 S. Ct. 1743,

1749 (2019) (citing Fed. R. Civ. P. 12(a)(1)(A)-(B)).

Counterclaims are a mix of both claims and

defenses. Counterclaims are similar to claims in that

they “may request relief that exceeds in amount or

differs in kind from the relief sought by the opposing

party.” Fed. R. Civ. P. 13(c). Moreover, whereas “[a]

defense cannot possibly be adjudicated separately

from the plaintiff’s claim to which it applies[,] a

counterclaim can be” because it is an affirmative

entitlement to relief. Reiter v. Cooper, 507 U.S. 258,

265 (1993). That said, counterclaims are similar to

defenses in that they are raised in response to a

plaintiff’s pleading and in that they cannot be used to

support arising under jurisdiction. Holmes Grp., Inc.

v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 831

(2002); see 28 U.S.C. § 1446(c)(2).

The Federal Rules have also long distinguished

between compulsory counterclaims and permissive

counterclaims. Compulsory counterclaims are defined

as those that “arise[] out of the transaction or

occurrence that is the subject matter of the [plaintiff’s]

claim.” Fed. R. Civ. P. 13(a)(1). If a compulsory

counterclaim “is not brought” at the first opportunity,

the defendant will be “barred” from raising it in any

later proceeding, whether in an affirmative pleading

or in a responsive pleading. Baker v. Gold Seal

Liquors, Inc., 417 U.S. 467, 469 n.1 (1974). By

contrast, permissive counterclaims—i.e., those “that

[are] not compulsory,” Fed. R. Civ. P. 13(b)—may be

raised in later proceedings even if they were omitted

in previous proceedings, unless claim preclusion

otherwise bars them. See Baker, 417 U.S. at 469 n.1.

2. The decision below collapses the Federal Rules’

clear and long-settled distinctions among claims,

defenses, and counterclaims. Under the Second

Circuit’s novel “defense preclusion” rule, all defenses—

even those that do no more than diminish or defeat a

plaintiff’s claim—are given the preclusive equivalent

of compulsory counterclaims: Just like compulsory

counterclaims will be barred under Rule 13 if not

brought at the first opportunity in response to claims

that arise out of the same transaction or occurrence,

every defense will be barred under “defense

preclusion” if not raised (and litigated to judgment) in

response to the first claim to which it might apply.

That result is contrary to the plain text of the

Federal Rules, which make clear not only that

allegations that actually constitute a defense may be

treated as such even though erroneously denominated

as a counterclaim, Fed. R. Civ. P. 8(c), but also that

counterclaims that do not arise out of the same

transaction or occurrence as the plaintiff’s claim are

not “compulsory,” compare Fed. R. Civ. P. 13(a), with

Fed. R. Civ. P. 13(b). Under the Federal Rules, in

other words, where neither claim preclusion nor issue

preclusion applies, only compulsory counterclaims, not

defenses or permissive counterclaims, are barred if not

brought at the first opportunity.

And there can be no question here that Lucky’s

release defense was not a compulsory counterclaim.

As an initial matter, Lucky’s release defense was not

a counterclaim at all. The defense could not afford

Lucky any affirmative relief within the meaning of

Rule 8. It is applicable only in defending against a

claim for trademark infringement that falls within the

ambit of the Settlement Agreement.

Nor could Lucky’s release defense be construed as

a compulsory counterclaim under Rule 13(a). The

defense does not arise from the same transactional

facts as did the claims in the 2005 Action or the

Current Action, but rather from the Settlement

Agreement that resolved the 2001 Action. And

because a defense premised on an agreement

obviously could not have grown out of transactions

that arose after the agreement was signed, Lucky’s

release defense did not “arise[] out of the transaction

or occurrence that [formed] the subject matter of

[Marcel’s] claim[s]” in the 2005 Action (or the Current

Action). Fed. R. Civ. P. 13(a)(1). As such, asserting it

in the 2005 Action (or the Current Action) would have

at most been analogous to a permissive counterclaim—

and failure to litigate permissive counterclaims has no

preclusive effect. See, e.g., Valley View Angus Ranch,

Inc. v. Duke Energy Field Servs., Inc., 497 F.3d 1096,

1102-03 (10th Cir. 2007); D-1 Enters., Inc. v.

Commercial State Bank, 864 F.2d 36, 39-40 (5th Cir.

1989).

Moreover, it would be passing strange to say a

defense is foreclosed when, if simply recast as

counterclaim, it would not have been. After all, Rule

8 clearly allows courts to reframe defenses and

counterclaims when improperly denoted, and Rule 13

does not purport to foreclose any defenses at all. In

any event, as discussed above, because Marcel’s

current claims are based on acts of alleged

infringement that all postdate the parties’ prior

litigation, they are not the same as the claims litigated

in any prior case. See supra p.25. And the fact that

the release defense could have applied to both the

2005 Action and the Current Action further confirms

that the release defense could not have constituted a

compulsory counterclaim that had to be brought in the

2005 Action or never at all.

3. Finally, although Rule 13 is not itself an

application of res judicata, the distinction Rule 13

draws

between

compulsory

and

permissive

counterclaims is consistent with basic principles of

preclusion. As explained, see supra pp.25-26, the

effect of claim preclusion is absolute where it applies;

a prior judgment “is not only conclusive as to what was

actually determined respecting such demand, but as

to every matter which might have been brought

forward and determined respecting it.” Werlein v. City

of New Orleans, 177 U.S. 390, 397 (1900) (quoting

Davis, 94 U.S. at 428). But, also as explained, see

supra p.23, claim preclusion is limited to the scope of

the “transaction” or occurrence underlying the claim

resolved in the prior case. Tohono, 563 U.S. at 316. It

thus has no application unless a later suit between two

parties involves “the very same claim” that was

adjudicated to judgment in a prior suit. Taylor, 553

U.S. at 892 (emphasis added).

The compulsory counterclaim rule follows the

same pattern. Just like the definition of a “claim” for

purposes of preclusion, see Whole Woman’s Health,

136 S. Ct. at 2305, a compulsory counterclaim is

defined by the “transaction” underlying the claim

itself. See Fed. R. Civ. P. 13(a)(1)(A). So just as

defenses will be precluded whether or not they were

raised in the initial litigation if they are later asserted

to collaterally challenge the same claim that was

previously adjudicated in favor of the plaintiff, see

supra pp.25-26, compulsory counterclaims—which

stem from the same transaction as the claim—must be

raised at the first opportunity or are forever barred.

And just as defenses to new claims are not precluded

even if they were relevant to the claim in the first

action, see supra p.25, permissive counterclaims—

which do not stem from the same transaction as the

claim—need not be raised at the first opportunity.

Properly understood, then, Rule 13 is of a piece

with the ordinary and time-tested principles of

preclusion discussed above. If a plaintiff prevails on

its claim, it matters not whether the defendant had a

winning defense that it simply failed to raise; claim

preclusion bars all such attacks on the judgment once

it is entered, whether in the same litigation or in a

subsequent suit. Rule 13 simply reinforces that

principle by forcing defendants to raise all

“counterclaims” that arise out of the transaction

underlying the plaintiff’s claim. In short, Rule 13

buttresses, but does not expand, the ordinary effect of

claim preclusion. Indeed, “the Restatement (Second)

of Judgments now identifies the compulsory

counterclaim as marking the scope of ‘defense

preclusion.’” Rochelle Cooper Dreyfuss & Linda J.

Silberman, Interjurisdictional Implications of the

Entire Controversy Doctrine, 28 Rutgers L.J. 123, 160

(1996). 8

8 See also Howard M. Erichson, Interjurisdictional Preclusion,

96 Mich. L. Rev. 945, 977 n.161 (1998) (“The claim-preclusive

effect of the compulsory counterclaim rule can be understood as

common law ‘defense preclusion’ that incorporates the

requirement of the compulsory counterclaim rule.” (citing

Restatement (Second) of Judgments § 22(2) (1982))).

That is all the more obvious in light of this Court’s

decision in Mercoid Corp. v. Mid-Continent Investment

Co., 320 U.S. 661 (1944). In the first Mercoid case, the

plaintiff’s patent was held to be valid; in the second

Mercoid case, the defendant raised a patent-misuse

counterclaim that could have been litigated by privies

in the first case, but was not. Id. at 662-64. The

plaintiff argued that the defendant was precluded

from raising that defense in the second case because

its privies failed to raise it in the first case, but this

Court disagreed. Id. at 670-71. The counterclaim was

not compulsory, so claim preclusion did not apply

against the plaintiff. Id. at 671. And because misuse

was not finally adjudicated in the first case, the

defendant was not precluded from raising the issue in

the second case against the plaintiff’s new claims. Id. 9

That is exactly the opposite of what Marcel II held

below. See Pet.23-24. To be sure, the Marcel II panel

did not “rely on,” or even mention, “the distinction

between permissible or compulsory counterclaims” in

its decision. BIO.30. But the fact that the Second

Circuit ignored the Federal Rules does not make its

decision any less inconsistent with them.

IV. The Decision Below Would Result In

Unnecessary

And

Inefficient

OverLitigation Of Defenses.

The court below seemed to believe that efficiency,

which drove its decision, was the ne plus ultra of res

9 The Court ultimately remanded for resolution of whether “the

second cause of action between the parties is [actually] upon a

different claim [as] the prior judgment.” Mercoid, 320 U.S. at

670-71. If the second case did not involve different claims from

the first, then the plaintiff would be claim precluded. Id. at 670.

judicata. That is wrong, for all the reasons explained

above. But even if the Marcel II panel were right on

that score, its novel “defense preclusion” rule does not

come close to promoting efficient litigation. Although

the Federal Rules impose no compulsory joinder of

defenses, that is the effect of the Second Circuit’s new

rule. In practice, de facto compulsory joinder of

defenses will force counsel for defendants to raise and

litigate to judgment every possible defense, lest their

client be deemed “precluded” from raising the defense

in a later case involving different claims (and lest

counsel find herself sued for malpractice). It is hard

to imagine a more inefficient outcome.

Indeed, litigating every defense to judgment is the

exact opposite of what courts expect of and urge from

litigants. As lawyers and frequent litigants know all

too well, courts routinely extol the virtues of parties

streamlining their cases and picking the most

pertinent claims and defenses for trial. To that end,

courts frequently grant motions to dismiss a subset of

claims without prejudice pursuant to Rule 15. And it

is no answer to say that, if a party decides to drop a

defense, that necessarily signals that the defense was

weak; even strong defenses may only apply to a subset

of asserted claims. In a world of limited resources,

such defenses are candidates for the cutting room

floor. But in the brave new world of defense preclusion

the decision below would usher in, no defendants

should willingly trim their case (and no defendant’s

counsel should advise it) for fear of that decision

coming back to haunt them in a future case involving

entirely different claims where they may wish to

assert a defense anew.

That result would be untenable regardless of the

context. Even if two cases involve the same parties

and similar issues, the stakes in the two cases will

almost inevitably be different. See Cromwell, 94 U.S.

at 356. The amounts in controversy, the strength of

the plaintiff’s claims, the parties’ financial positions,

the availability of other defenses, and myriad other

factors all may have changed from the first case to the

second. As such, a defense that was dispositive in one

case might be peripheral in another, even if the two

cases are otherwise similar. This Court’s case law

reflects the reality that defendants will have different

incentives to raise different defenses in response to

different claims, and allows defendants to raise

defenses to new claims even if those defenses could

have been litigated in prior cases, but were not. See,

e.g., id. (recognizing that defendants often have good

reasons not to raise every defense, “such as the

smallness of the amount or the value of the property

in controversy, the difficulty of obtaining the

necessary evidence, the expense of the litigation, and

his own situation at the time”). The Second Circuit’s

contrary “defense preclusion” rule does not.

That is particularly problematic given that this is

a trademark case.

“The principle underlying

trademark protection is that distinctive marks—

words, names, symbols, and the like—can help

distinguish a particular artisan’s goods from those of

others.” B & B Hardware, 135 S. Ct. at 1299.

Common sense and lived experience, however, have

shown that what distinguishes two things today might

not distinguish them tomorrow. Trademark law

contains a number of doctrines to deal with and reflect

that reality. A descriptive term might “acquire[]

distinctiveness” (and thus trademark protection) “by

gaining secondary meaning over time in the

marketplace.” Times Mirror Magazines, Inc. v. Las

Vegas Sports News, L.L.C., 212 F.3d 157, 165 (3d Cir.

2000). By contrast, a mark that was once protectable

“may become generic over time through common

usage.” BellSouth Corp. v. DataNational Corp., 60

F.3d 1565, 1570 (Fed. Cir. 1995). A mark may even

become “incontestable” (i.e., unable to be challenged

for mere descriptiveness or lack of secondary meaning)

after five years of continuous use if the owner of a

registered trademark can show that certain statutory

requirements have been met. 15 U.S.C. § 1065.

The likelihood of confusion between two marks

also inherently may change over time. In the Second

Circuit, courts evaluate the likelihood of confusion

using eight factors: (1) strength of the plaintiff’s

mark, (2) similarity of the marks, (3) proximity of the

products, (4) likelihood the plaintiff will bridge the gap

between the two products, (5) actual confusion, (6) the

defendant’s good or bad faith, (7) quality of the

products, (8) sophistication of consumers. Polaroid

Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d

Cir. 1961) (Friendly, J.). In looking at the factors, one

can easily see how time and intervening events could

impact the analysis. 10

10 Polaroid was very influential.

Other circuits have adopted

substantially similar tests.

See 4 J. Thomas McCarthy,

McCarthy on Trademarks and Unfair Competition § 24:30 (5th

ed. 2018) (“The Various Circuit Multi-Factor Tests are Not

Fundamentally Different”); see also id. §§ 24:31-43 (cataloguing

factors used by each circuit).

The strength of a mark in identifying the source

of a product (factor one) may wax and wane, as a brand

that was widely known fifty years ago may have far

less consumer recognition today, or vice versa. The

similarity of marks (factor two) may change over time

as well, especially because the analysis focuses not

just on the words themselves, but on marketplace

conditions and the “context” in which the marks are

found, which might change as parties adopt new logos,

typefaces, or other branding. See Star Indus., Inc. v.

Bacardi & Co., 412 F.3d 373, 386 (2d Cir. 2005); see

also J.T. Colby & Co. v. Apple Inc., 2013 WL 1903883,

at *16 (S.D.N.Y. May 8, 2013), aff’d, 586 F. App’x 8 (2d

Cir. 2014). Proximity of the products (factor three)

also can shift as parties open new product lines. And

new instances of actual confusion (factor five) may

occur in response to changes in branding or the

products offered, just as the quality of products (factor

seven) and sophistication of consumers (factor eight)

can ebb and flow.

All of those developments can affect the strength

of a trademark-infringement claim or the strength of

a defense thereto. As such, a defense that might be

peripheral in an earlier case could become crucial a

decade down the line, even if many of the brands at

issue are the same. Those developments can also

change the valence of particular issues in dispute,

such that an issue in a present case that might appear

superficially similar to an issue litigated in a prior

case could in fact be entirely different. It should come

as no surprise, then, that courts confronting

preclusion arguments in trademark cases typically

pay close attention to the facts on the ground at the

time of both suits and the substance of the issues

presented. See, e.g., Jim Beam Brands Co. v. Beamish

& Crawford Ltd., 937 F.2d 729, 734 (2d Cir. 1991);

Tex. Pig Stands, Inc. v. Hard Rock Cafe Int’l, Inc., 951

F.2d 684, 691 (5th Cir. 1992); B & B Hardware, Inc. v.

Hargis Indus., Inc., 569 F.3d 383, 388-90 (8th Cir.

2009).

The facts of this case illustrate the point. The

district court denied Lucky’s motion to dismiss in the

2005 Action on the specific ground that it was unclear

whether the Settlement Agreement actually resolved

all of Marcel’s claims (because some of them involved

marks registered after May 2003). Pet.App.28. In

light of that clear law of the case, it was more than

reasonable for Lucky to choose not to expend resources

on (and burden the court with) a defense that might

not resolve every claim. That is particularly true

given that the focus of the case was the GET LUCKY

mark, which is not encompassed in the Settlement

Agreement’s release. Moreover, Lucky no longer uses

the phrase “Get Lucky” alongside its other “Lucky”

marks at all, which materially changes the context in

which the marks are found, and thus the strength of

any infringement claim premised on its usage.

The Marcel II panel nonetheless found “no

conceivable justification” why Lucky did not “fully

litigate[] the release defense in the 2005 Action.”

Pet.App.20. Indeed, it refused even to remand the

case to allow the district court to decide whether

Lucky’s decision not to pursue the release decision at

trial was reasonable. That is a remarkable conclusion,

and it is one that reveals just how far afield the Second

Circuit’s new approach is from the traditional

concerns that underlie preclusion law.

Marcel II’s new “defense preclusion” rule is also

fundamentally unfair more generally. Although it

paid lip service to considerations of fairness, see

Pet.App.17, the Marcel II panel held that it would

have been abuse of discretion to conclude that the

“efficiency” of preclusion did not outweigh the

unfairness of barring Lucky from raising a defense

never previously resolved, Pet.App.19.

That

conclusion is remarkable. The same “inefficiencies”

the court cited are present every time a defendant

could have litigated an issue to judgment in an earlier

proceeding, but chose not to. And yet it has been the

law of the land for nearly 150 years that “where the

second action between the same parties is upon a

different claim” from the first case, the defendant is

only precluded in the second case from raising

defenses that were conclusively “determin[ed]” in the

first case. Cromwell, 94 U.S. at 353; accord, e.g.,

Davis, 94 U.S. at 428-29 (In “a subsequent action

between the same parties upon a different [claim],”

the defendant is “only” precluded from raising

“matter[s]” that were “actually at issue and

determined in the original action.”).

The rules of claim preclusion “reflect[] the

expectation that parties who are given the capacity to

present their ‘entire controversies' shall in fact do so.”

Restatement (Second) of Judgments § 24 cmt. a. Like

other procedural rules, this aspect of claim preclusion

channels the parties’ rights to assert claims and

defenses based on the default expectation that a

controversy will be adjudicated only once.

See

Montana v. United States, 440 U.S. 147, 153 (1979)

(doctrine conserves judicial resources). But it has no

application where, as here, the first proceeding

involved a different claim. When a different claim is

at issue, it is fundamentally unfair to strip defendants

of the constitutional protection provided by the

“actually decided” rule in this context. Yet that is

precisely what the Second Circuit’s novel “defense

preclusion” rule accomplishes.

Indeed, one need look no further than the

consequences of the rule in this very case to confirm

that conclusion. Had the panel in Marcel II simply

followed traditional preclusion principles, the

Settlement Agreement would have barred Marcel’s

claims, as the district court held, thus ending the

Current Action. Yet because Lucky did not litigate the

Settlement Agreement as a defense in the 2005 Action,

a case involving different claims and different stakes,

Lucky has now lost that defense forever under the

Second Circuit’s rule. That is not just the height of

inefficiency; it fundamentally deprives Lucky of the

benefit of the bargain it struck, and undercuts the

strong policy interest that all courts have in promoting

settlement.

In sum, no precedent or principle

supports the Second Circuit’s novel rule, and no policy

interest commends it.

CONCLUSION

For the foregoing reasons, the Court should

reverse.

Respectfully submitted,

DALE M. CENDALI

JOHN C. O’QUINN

Counsel of Record

MATTHEW D. ROWEN

CLAUDIA RAY

KIRKLAND & ELLIS LLP

MARY C. MAZZELLO

1301 Pennsylvania Ave., NW

KIRKLAND & ELLIS LLP Washington, DC 20004

601 Lexington Avenue

(202) 389-5000

New York, NY 10022

(212) 446-4800

dale.cendali@kirkland.com

Counsel for Petitioners

September 11, 2019

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.