Los Angeles Team Secures $1.3 Million in Attorneys’ Fees in Lanham Act Victory

Los Angeles, Calif. (February 26, 2020) - Los Angeles Partners Daniel C. DeCarlo and Leo A. Bautista, along with Associate Esther Yae Shin, recently secured an award of $1.3 million in attorneys' fees on behalf of their clients in a Lanham Act and franchise agreement dispute. In addition to awarding fees pursuant to California statutory law, the United States District Court for the Central District of California exercised its inherent authority under U.S. Supreme Court precedent and awarded fees and costs as sanctions for the plaintiff's bad faith and fraudulent conduct.

In the underlying action, we represented the franchisees of a martial arts studio. The plaintiff-franchisor alleged that the defendants breached franchise agreements and violated the Lanham Act. We counterclaimed for declaratory relief.

Following a bench trial last October, the court determined that the plaintiff did not meet its burden on any of its claims. In addition, the court granted the defendants' counterclaims for declaratory relief regarding certain franchise and licensing agreements. As such, it awarded our client attorneys’ fees and costs as the prevailing party pursuant to §1717 of the California Civil Code (Code). In addition, the court exercised its inherent power under Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991) in determining that the defendants should be awarded attorneys' fees and costs as a sanction for the plaintiff's bad faith and fraudulent conduct. We subsequently filed its accounting and motion for attorneys' fees and costs.

In its order on the defendant's motion, the court awarded our clients $1,177,238 in fees and $84,528.72 in costs as the prevailing party under California's Code. It also entered an independent award for $1,241,784 in fees and $84,528.72 in costs under its inherent authority to issue fees and costs as a sanction. In doing so, the court noted that the plaintiff's owner and CEO engaged in sanctionable conduct throughout the litigation, including lying under oath, in deposition testimony, and on the stand. According to the court, he also showed a reckless disregard for the truth when threatening one of our client's personal and professional reputation and leveling "salacious allegations" to coerce a settlement in the case.

As such, the court concluded that the plaintiff's "bad faith litigation tactics and fraud" warranted an award for all attorneys' fees and costs, and instructed the defendants to pursue fees and costs under either theory.