Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.
Waetzig v. Halliburton Energy Services, Inc.
Gary Waetzig filed a federal age-discrimination lawsuit against his former employer Halliburton Energy Services, Inc. He later submitted his claims for arbitration and voluntarily dismissed his federal lawsuit without prejudice under Federal Rule of Civil Procedure 41(a). After losing at arbitration, he asked the district court to reopen his dismissed lawsuit and vacate the arbitration award, asserting Federal Rule of Civil Procedure 60(b) as the basis for reopening the suit.
Federal Rule of Civil Procedure 60(b) permits relief from a “final judgment, order, or proceeding.” The district court reopened the case, finding that a voluntary dismissal without prejudice counts as a “final proceeding” and that Waetzig made a mistake when he dismissed his case rather than seeking a stay. The district court separately granted Waetzig’s motion to vacate the arbitration award. The 10th Circuit Court of Appeals reversed.
The U.S. Supreme Court held that a case voluntarily dismissed without prejudice under Rule 41(a) counts as a “final proceeding” under Rule 60(b).
The court didn’t address Halliburton’s argument regarding jurisdiction over the motion to vacate. The question of whether Rule 60(b) permits reopening a case that was voluntarily dismissed without prejudice is antecedent to jurisdictional questions about the motion to vacate. The high court noted lower courts may address those questions on remand.
In the unanimous opinion delivered by Justice Samuel Alito Jr., the court explained that text, context and history support its conclusion.
The court noted that legal dictionaries from 1938 to the present suggest that the term “proceeding” encompasses all steps in an action’s progression. Other federal rules similarly treat “proceeding” as including all formal steps in an action.
The court went on to explain that Rule 60(b) was modeled after a California statute previously interpreted to extend to voluntary dismissals without prejudice.
The U.S. Supreme Court reversed the judgment from the 10th Circuit and remanded the case.
Dewberry Group, Inc. v. Dewberry Engineers Inc.
Dewberry Engineers successfully sued competitor real estate development company Dewberry Group for trademark infringement under the Lanham Act, which provides for a prevailing plaintiff to recover the “defendant’s profits” deriving from improper use of a mark.
Dewberry Group provides services needed to generate rental income from properties owned by separately incorporated affiliates. That income goes on the affiliates’ books; Dewberry Group receives only agreed-upon fees. And those fees are apparently set at less than market rates — the group has operated at a loss for decades, surviving only through cash infusions by John Dewberry, who owns both the group and the affiliates.
To reflect that “economic reality,” the district court treated Dewberry Group and its affiliates “as a single corporate entity” for purposes of calculating a profits award. The district court totaled the affiliates’ real estate profits from the years Dewberry Group infringed, producing an award of nearly $43 million. A divided Court of Appeals panel affirmed that award.
The U.S. Supreme Court held that, in awarding the “defendant’s profits” to the prevailing plaintiff in a trademark infringement suit under the Lanham Act, a court can award only profits ascribable to the “defendant” itself. And the term “defendant” bears its usual legal meaning: the party against whom relief or recovery is sought — here, Dewberry Group. The engineers chose not to add the group’s affiliates as defendants.
While a court may in select circumstances “pierce the corporate veil,” especially to prevent corporate formalities from shielding fraudulent conduct, Dewberry Engineers admits that it never tried to make the showing needed for veil-piercing. So the demand to respect corporate formalities remains, the high court found. And that demand accords with the Lanham Act’s text: the “defendant’s profits” are the defendant’s profits, not the defendant’s plus its affiliates’.
Dewberry Engineers does not contest these points; it instead argues that a court may take account of an affiliate’s profits under a later sentence in the Lanham Act’s remedies section: “If the court shall find that the amount of the recovery based on profits is either inadequate or excessive[,] the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances.”
In the engineers’ view, this so-called “just-sum provision” enables a court, after first assessing the “defendant’s profits,” to determine that a different figure better reflects the “defendant’s true financial gain.” And at that “second step” of the process, the court can consider “as relevant evidence” the profits of related entities.
But the high court found the district court didn’t rely on the just-sum provision. It simply treated Dewberry Group and its affiliates as a single corporate entity in calculating the “defendant’s profits.” And the appeals court approved that approach, thinking it justifiable in the circumstances to ignore the corporate separateness of the affiliated companies. The just-sum provision didn’t come into the analysis and therefore doesn’t support the $43 million award given.
In remanding this case for a new award proceeding, the court acknowledged it left a number of questions unaddressed. The court noted it expressed no view on whether or how the courts could have used the just-sum provision to support a profits award; whether or how courts can look behind a defendant’s tax or accounting records to consider a defendant’s true financial gain even without relying on the just-sum provision; and whether veil-piercing remains an available option.
The U.S. Supreme Court vacated the judgment of the appeals court.
Justice Elena Kagan delivered the opinion for a unanimous court. Justice Sonia Sotomayor filed a concurring opinion.