Ninth Circuit Resuscitates Fred Segal Trademark Case

Thursday, August 6, 2020

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Ninth Circuit Resuscitates Fred Segal Trademark Case

Opinion Says Judge Erred in Determining That Denial of Earlier Motion for Summary Judgment Created Law of the Case, Precluding the Granting of Leave to Amend; Motion for Leave Must Be Redecided

By a MetNews Staff Writer

The Ninth U.S. Circuit Court of Appeals has breathed new life in a trademark infringement action brought by Los Angeles fashion retailer Fred Segal, LLC in which it seeks to force removal of the company name from the iconic building at the corner of Melrose Avenue and Crescent Heights Boulevard which it sold in 2001.

The decision came in a memorandum opinion, filed Tuesday. Finding that leave to amend the complaint was denied on an erroneous basis, the opinion orders further proceedings for a fresh decision on the motion.

At the time of the 2001 sale, Fred Segal licensed continued use of its name on the building—known as the Melrose Center—to the purchasers, Bernard Brown Jr. and seven members of his family, a right the Browns extended, in leases, to their tenants. But, Fred Segal has asserted, the license was not transferable to the Canadian real estate firm of CormackHill which in 2016 bought the building from the Browns.

U.S. District Court Judge Virginia A. Phillips of the Central District of California on March 16, 2018 granted partial summary judgment to Fred Segal, agreeing that CormackHill was a not a third party beneficiary of the licensing agreement. She partially denied summary judgment to Fred Segal, however, concluding that it was entitled to no damages because at least one tenant, Ron Robinson, Inc. (which operated a clothing store), retained the right to use of the name, under its lease.

It would maintain that right so long as it were a hold-over tenant, she said.

Above is the “Melrose Center” at the southwest corner of Melrose Avenue and Crescent Heights Boulevard, in the Melrose Heights District. The Ninth U.S. Circuit Court of Appeals has ordered that Fred Segal, LLC’s be given another chance to persuade a District Court judge that it should be allowed to amend its complaint to seek an order that its trademarked name “Fred Segal” be removed from the building, which it no longer owns.

New Approach

The plaintiff then sought leave to amend to pursue declaratory and injunctive relief. It wanted to establish that the “Fred Segal” signs must come down when the Robinson lease expires on Oct. 31, 2019, or sooner if the tenancy ends before that date.

Phillips turned down the motion on July 12, 2018, based on the “law of the case” doctrine.

She said that Fred Segal had argued in connection with cross motions for summary judgment, “as it does again here, that all Fred Segal Name signs at the Melrose Center should be removed no later than the lease expiration date for any tenants with the right to the Fred Segal Name,” and recited:

“The Court found that the tenant leases (including the Ron Robinson, Inc. lease) ‘can be extended on a month-by month basis.’…The Court also determined that such a holdover would extend the tenants’ lease rights, including the right to use the Fred Segal Name….As a result, the Court found that a contractual affirmative defense based on the tenant leases could be available beyond the date the tenant leases expired if a tenant elected to hold over on a month-to-month basis beyond the expiration date of their leases….Because the Court also found at least one tenant retained the right to use the Fred Segal Name as part of its lease…, the necessary implication is that there is no date certain for when the Fred Segal Name signs must be removed from the Melrose Center at this time. This is now law of the case.”

Accordingly, Phillips declared, an amendment would be futile, and judgment on the Fred Segal complaint must be entered in favor of CormackHill.

Ninth Circuit Opinion

The opinion reversing that judgment was signed by Chief Judges Sidney R. Thomas and Judges Kim McLane Wardlaw and Jacqueline H. Nguyen. The opinion explains:

“[R]ejection of Fred Segal’s position at summary judgment was not law of the case requiring the district court to conclude that such holdover tenants, if any, would be entitled to retain licensing rights on a month-to-month basis indefinitely.”

The Ninth Circuit’s 2014 opinion in Peralta v. Dillard is quoted as saying:

“[T]he denial of a summary judgment motion is never law of the case because factual development of the case is still ongoing.”

Tuesday’s opinion says that “the district court’s summary judgment ruling does not preclude Fred Segal. LLC from providing new or different evidence and law to support its argument,” and because Phillips based the denial of leave to amend on a contrary notion, there must be a remand for further proceedings.

The opinion also affirms the granting of partial summary judgment to Fred Segal.

It does not reflect the development that the Ron Robinson store in the Melrose Center is now closed.

Fred Segal operated at Melrose and Crescent Heights from 1961 until it sold the building. It now has stores in Los Angeles County on the Sunset Strip, in Malibu, and at Los Angeles International Airport.

The case is Fred Segal, LLC v. CormackHill, LP, 18-56093.