Did BCBG Max Azria really "win" its case against Stretta Moda over a "bandage dress knockoff"? Well, yes and no...

Posted by Charles Colman

Over the past two weeks, multiple media outlets have reported that BCBG Max Azria "won" its lawsuit against Stretta Moda over the alleged infringement of trade-dress rights in BCBG's Hervé Léger "Bandage Dress."  (See, for example, Women's Wear Daily, "BCBG's Group Wins Trademark Suit in L.A." (May 10, 2013).)

 

 

LAW OF FASHION must admit that when it first posted the story to the LOF LinkedIn group, it inadvertently perpetuated this oversimplification. Having now reviewed the documents filed in the litigation, LOF wishes to point out that BCBG did not, in fact, win its case in the sense of convincing a judge and/or jury that its intellectual property rights had been infringed.  It merely extracted a settlement -- albeit an unusually favorable and public one -- from defendant Stretta Moda (who had already gotten some heat from the judge during the proceedings for various shenanigans, and perhaps wasn't keen on arguing the merits of the case to a hostile audience) and part of that settlement was an agreement between the parties to have the court enter a so-called consent judgment (a/k/a "consent decree") in BCBG's favor.  (See that judgment below and at Scribd.)  The court obliged, but this is no "judgment" in the true ordinary sense; perhaps most importantly, it does not establish a precedent that can be invoked by unrelated parties in future disputes.

The so-called "consent decree" is a tool used by plaintiffs with increasing frequency, especially in the intellectual-property realm; the device appeals to plaintiffs because, once endorsed by the court, it purports to allow them to complain to the judge anytime the defendant does something that the plaintiff feels is in violation of the decree's terms.  In addition to a potential cause of action for breach of contract (there is often a more conventional settlement agreement between the parties, supplemeting the decree), the "stipulated judgment" of a consent decree provides a plaintiff with the power to seek the drastic remedy of contempt against a defendant for doing anything that it deems contrary to the court's "order" settling the case.

Why would any defendant accept such a raw deal, you ask?  Well, often, a plaintiff will agree to drop a suit that a defendant can no longer afford to fight (and/or expects to lose), but only on the condition that a traditional settlement agreement -- that is, a private contract more or less like any other -- be accompanied by a consent decree.  The threat of contempt is a pretty strong deterrent, after all, potentially obviating the need to prove damages for breach of contract and/or irreparable harm (maybe) and the other requirements for obtaining an injunction based on a contract.  Also, especially in the IP arena, most plaintiffs would rather stick with the federal judge already familiar with the case than start a whole new lawsuit to enforce the terms of a settlement agreement in state court (usually) before a judge who will likely be unfamiliar with intellectual-property issues.  (Most IP matters are initially brought, either as a matter of law or practice, exclusively in federal court.)

But wait, 1Ls studying for Civ Pro exams are saying; how can the parties and the judge agree to keep what is now essentially a contract dispute (at least, where that dispute is between non-diverse parties) in federal court, a forum with limited jurisdiction, just because it's more convenient for enforcement?  Well, there is a legitimate argument that they can't constitutionally create these artificial "bubbles" of subject-matter jurisdiction.  This writer made that argument in this brief (pages 12 to 16) on behalf of a fashion client, and even appealed the district court's perfunctory treatment of the issue to the Second Circuit, but the dispute never reached the stage where the question of subject-matter jurisdiction could be argued before the appellate court.  Can't elaborate.

As an attorney focused on intellectual-property disputes, I certainly understand why plaintiffs would want to keep a suit in federal court, even after it is "CLOSED" (see the BCBG v. Stretta docket, below.)  I even understand why it might sometimes be preferable to represent an IP defendant accused of breaching a settlement agreement in federal court, whether because of judicial familiarity with the relevant legal principles or in order to set good, controlling precedent.  But such considerations do not make this "consent decree" nonsense constitutional -- or fair to defendants, many of whom find themselves coerced into accepting a settlement only as a package deal with a stipulated consent judgment (thereby subjecting them to the possible penalty of contempt of court for, essentially, the rest of their lives, over the same dispute.)

In short, consent decrees (whether called "stipulated consent judgments," as in BCBG v. Stretta, or otherwise denominated) might be expedient, but they're deeply flawed in other respects, and it's time for the federal courts to recognize that.  As a wise man once wrote: "That the practice of retaining jurisdiction for enforcement purposes might be common cannot, of course, inoculate that practice from scrutiny under fundamental legal principles."

 

BCBG Max Azria v. Stretta Moda, No. 2-12-CV-2088-ABC (C.D. Cal. Apr. 23, 2013)

 

 

BCBG Max Azria v. Stretta Moda, No. 2-12-CV-2088-ABC (C.D. Cal.) (docket, 5/13/13)

 

[Like everything on LAW OF FASHION, this post is for entertainment and informational purposes only, and does not constitute legal advice or create an attorney-client relationship among any individuals or entities. Any views expressed in this post or at the linked web pages are those of the relevant writer(s) on a particular date, and should not necessarily be attributed to Charles Colman, his law firm, or its agents or clients. Neither the writer of this post nor LAW OF FASHION (or any person or entity associated with it) can or will warrant the thoroughness or accuracy of the content here or at the cited sources.]