Docket: T-605-07
Citation:
2015 FC 189
Montréal, Quebec, February 17, 2015
PRESENT: The
Honourable Madam Justice St-Louis
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BETWEEN:
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H-D U.S.A., LLC AND HARLEY-DAVIDSON MOTOR COMPANY, INC.
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Plaintiffs
(Defendants by Counterclaim)
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and
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JAMAL BERRADA, 3222381 CANADA INC. AND EL BARAKA INC.
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Defendants
(Plaintiffs
by Counterclaim)
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JUDGMENT AND REASONS
I.
CONTEXT
[1]
The Plaintiffs and the Defendants have been
engaged in legal proceedings since 2007, at which time the Plaintiffs sought
declarations that they were entitled to distribute, advertise, offer for sale,
and sell their products using the trade-mark SCREAMIN’ EAGLE in Canada. The Defendants counterclaimed that they have been properly using the SCREAMING
EAGLE and SCREAMIN’ EAGLE trade-marks for over 20 years and that the
Plaintiffs’ sale of clothing and accessories bearing those trade-marks or
similar marks was only undertaken in an effort to diminish, destroy or acquire
their goodwill.
[2]
In a decision of this Court dated March 4, 2014,
Justice André Scott granted the Plaintiffs’ action, declared the Plaintiffs
entitled to distribute, advertise, offer for sale and sell collateral items,
including clothing, in connection with their trade-mark SCREAMIN’ EAGLE, in
association with their registered trade-mark HARLEY-DAVIDSON, throughout Canada
but exclusively at HARLEY-DAVIDSON dealerships, as this would not infringe any
valid rights of the Defendants, and he dismissed the Defendants’ counterclaims.
[3]
In his decision, and as per the mutual request
of the parties, Justice Scott reserved his judgment on costs, and requested
that the parties submit written representations.
[4]
At paragraphs 209 to 216 of his decision,
Justice Scott addressed the issue of each party’s good and bad faith, and whether
the Defendants were entitled to the declarations and equitable remedies they
requested.
[5]
Justice Scott concluded that there was no
indication from the conduct of the Plaintiffs that they had engaged in bad
faith or lacked clean hands. In contrast, he found that at times, the
Defendants’ conduct had bordered on bad faith to the extent that “it is clear to the Court that Defendants are barred from any
equitable relief”.
[6]
The Court notes that Justice Scott’s finding
that the Defendants had engaged in bad faith pertains to the fact that they “willingly tried to associate themselves with HD and trade on
that name” and not to their conduct during the lengthy proceedings
leading up to his decision.
[7]
Justice Scott was appointed to the Federal Court
of Appeal after rendering the decision on the merits, and before the hearing on
costs. I recognize the fact that it is unusual for the judgment on costs not to
be rendered by the trial judge.
II.
SUBMISSIONS OF THE PARTIES
A.
Submissions of the Plaintiffs
[8]
The Plaintiffs submit that this is not a
situation in which rigid adherence to the Tariff is just or appropriate. In the
bill of costs they filed with their submissions, the Plaintiffs point to an
amount of $109,901.54 in counsel fees, and of $134,218.11 in disbursements should
the costs be awarded according to the top of column III. They are thus asking
the Court to exercise the discretion granted by Rule 400(1) of the Federal
Courts Rules, SOR/98-106 [the Rules] to increase the legal fees, and to
grant a lump sum award totalling $947,369.99.
[9]
They propose that this amount be divided into
three parts as follows:
1) An amount of $635,000, representing 50% of the incurred
legal fees in pursuing this matter to trial. According to the Plaintiffs, this
departure from the alleged usual practice of applying around 33% of the
incurred legal fees is justified given the Defendants’ conduct as well as the
result of the proceedings, the effort involved, and the conduct of the
proceedings;
2) The application of Rule 420 to double the portion of the
legal fees incurred after August 21, 2013, representing an amount of
$193,592.83. This, the Plaintiffs allege, is warranted given the Defendants’
rejection of the Plaintiffs’ Formal Offer to Settle [the Offer] of that date,
which was ultimately more favourable to the Defendants than the March 4, 2014
judgment;
3) The Plaintiffs’ reasonable disbursements, amounting to
$118,777.09.
[10]
The Plaintiffs base their submissions on the
fact that they were successful in all respects, that the case involved considerable
efforts, and that the Defendants’ conduct caused them to incur significant
fees.
[11]
Regarding the conduct of the proceedings, the
Plaintiffs point to six factors that militate in favour of applying fees higher
than those of the Tariff: (i) the Defendants’ pattern of conduct; (ii) the fact
that they maintained five separate causes of action against the Plaintiffs even
though one cause was ultra vires and another inapplicable; (iii) the
fact that the Defendants contested the scheduling of the Plaintiffs’ motion for
judgment based upon the fundamental admissions set out within the Agreed
Statement of Facts; (iv) the fact that the Defendants made numerous
inflammatory allegations; (v) the fact that the Defendants changed their
testimony throughout the litigation; and finally, (vi) the fact that the
Plaintiffs made genuine attempts to reach a compromise by way of settlement
offers, in particular, the Offer dated August 21, 2013.
[12]
In their response to the Defendants’ written
submissions on costs, the Plaintiffs add that all the actions initiated or
executed throughout this litigation were necessary, that the actions prior to
April 2011 should not be discarded as the essence of the litigation, i.e. the
ability for the Plaintiffs to sell its SCREAMIN’ EAGLE clothing in Canada never
changed, and as it forms part of the decision on the merits of March 4, 2014.
Furthermore, and contrary to the Defendants’ allegations, the fees incurred
after April 2011 represent about two thirds of the total fees, thus a
substantial amount of the total fees incurred. The Plaintiffs contest the
Defendants’ allegation that three senior partners were involved in the course
of the trial. Rather, they argue, two lawyers, one partner and one “non-partner/counsel” conducted the trial, while the
fees incurred by another partner were both limited and justified, as his
presence proved necessary to cross-examine a witness in French.
B.
Submissions of the Defendants
[13]
The Defendants are asking the Court to exercise
its discretion to make each party responsible for its own costs. In the
alternative, the Defendants request that costs be awarded as a lump sum not
exceeding $15,000.00.
[14]
In their written submissions on costs, the
Defendants based their request on the following factors:
1)
Justice Scott’s judgment did not confirm that
costs should be awarded in favour of the Plaintiffs;
2)
The Defendants acted in good faith, and had a
reasonable basis for their legal position;
3)
The Plaintiffs’ position changed dramatically in
April 2011. Accordingly, the Defendants should not be required to bear the
significant costs of the proceedings before April 2011 as the judgment itself
does not address the initial claim;
4)
The Offer dated August 21, 2013 was less
generous than the judgment, and Rule 420 therefore does not apply;
5)
Granting the amount of costs sought by the
Plaintiffs would rise to the level of punitive costs, and would be contrary to
the interests of justice;
6)
The Defendants were not the instigator of the
proceedings and only sought to defend themselves against the Plaintiffs’ claims.
[15]
In the Summary of Argument of Defendants
Concerning Costs, the Defendants further contest the claim by Plaintiffs with
respect to costs for five reasons: (i) the Plaintiffs modified their claims so
significantly in April 2011 that all expenses prior to April 2011 were no
longer relevant; (ii) the Plaintiffs’ hands are not clean as they were aware of
the Defendants’ use of SCREAMING EAGLE from about 1990 and they did not assert
their rights until 2007; (iii) the Defendants acted reasonably in abbreviating
the duration of the trial in various ways; (iv) the judgment on the merits
seriously prejudices the rights of the Defendants; and (v) the Plaintiffs acted
in bad faith by using SCREAMIN’ EAGLE and/or SCREAMIN’ EAGLE PERFORMANCE PARTS
in Canada.
[16]
Finally, the Defendants also contest some of the
fees and expenses submitted by the Plaintiffs, namely, the costs associated as
to the involvement of three solicitors, which was excessive in the
circumstances.
III.
DISCUSSION
[17]
The Court confirms that the costs are awarded to
the Plaintiffs, as their action was granted, while the Defendants’ counterclaims
were all dismissed.
[18]
As per Rule 407, costs are assessed in
accordance with Column III of the table to Tariff B, unless the Court decides
otherwise. In addition, “departure from Tariff B is
expressly contemplated by Rule 400(4) of the Rules (…)” (Philip
Morris Products SA v Malboro Canada Ltd, 2015 FCA 9 at para 4 [Philip
Morris]).
[19]
Rule 400(1) provides that the Court holds full
discretionary power over the amount and allocation of costs and may consider
the several non-exhaustive factors listed in Rule 400(3) in exercising its
discretion, including: the result of the proceeding, any written offer to
settle, the amount of work, and any other matter that it considers relevant.
[20]
In determining the reasonableness of a costs
award, the Court should bear in mind the varied purposes that costs can serve.
In this regard, the Federal Court of Appeal stated in Sherman v Canada (Minister of National Revenue – MNR), 2003 FCA 202 at para 46 [Sherman], as
follows:
It is now generally accepted that an award
of costs may perform more than one function. Costs under modern rules may serve
to regulate, indemnify and deter. They regulate by promoting early settlements
and restraint. They deter impetuous, frivolous and abusive behaviour and
litigation. They seek to compensate, at least in part, the successful party who
has incurred, sometimes, large expenses to vindicate its rights.
(See also Thibodeau v Air Canada, 2007 FCA 115 at para 24).
[21]
Having considered the submissions of both
parties as to costs, I am of the view that the result of the proceedings, the
amount of work involved and the Defendants’ rejection of the settlement offers
are relevant factors that militate in favour of awarding substantial costs.
This conclusion accords with the purposes of imposing costs, which are to
regulate, indemnify, and deter. In fact, this action lasted for more than seven
years and involved a substantial amount of work on the part of both parties.
Moreover, the Plaintiffs made three settlement offers to Defendants who
rejected them, and who showed no efforts to settle. In addition, the
Defendants’ allegations that the Plaintiffs acted in bad faith were rejected by
the Court which constitutes another factor to consider when deciding whether
increasing costs is warranted (Air Canada v Toronto Port Authority, 2010
FC 1335 at para 17 [Air Canada]). This Court has also held that
increased costs are justified in situations where an award of costs under the
Tariff B would be unjust to the successful party i.e. where a Tariff B award
would not properly satisfy the purpose of indemnification (Ultima Foods Inc
v Canada (Attorney General), 2013 FC 238 at paras 25-26 [Ultima Foods];
Air Canada at paras 15-16). This is such a case.
[22]
I agree with both parties that a lump sump award
is appropriate. The award of a lump sum in the present case is consistent with
the “[t]rend in recent case law favouring the award of
a lump sum based on a percentage of the actual costs to the party when dealing
with sophisticated commercial litigants that clearly have the means to pay for
the legal choices they make” (Eli Lilly v Apotex Inc, 2011 FC
1143 at para 36 [Apotex]). Moreover, a
lump sum award presents the advantage of saving time and costs to the parties
that would have otherwise resulted from the assessment process (Abbott
Laboratories v Canada (Minister of Health), 2007 FC 50 at para 9; Corsorzio
Del Prosciutto Di Parma v Maple Leaf Meats Inc, 2002 FCA 417 at para 12 [Consorzio]).
[23]
The Court is satisfied that a full
indemnification of the legal fees incurred by the Plaintiffs, on a
solicitor-client basis, amounts to $1,271,682.00. While the Plaintiffs are not
seeking this amount in fees, the Court may use this total for the purpose of
calculating the award (Consorzio at para 10; Apotex para 73).
[24]
In the amended statement of claims of 2011 and
2013, the Plaintiffs modified the requested relief. They renounced their
pursuit of declarations that the Defendants had violated their rights and
instead sought only declarations that they were entitled to distribute,
advertise, offer for sale and sell their products and that their activities did
not infringe or violate any rights of the Defendants. Such modification does
not amount to a significant change justifying the exclusion of the period prior
to April 2011 included in the calculation of costs as since the beginning, the
Plaintiffs sought to be able to sell their SCREAMIN’ EAGLE clothing in Canada
and this constituted the essence of the litigation. Moreover, this forms part
of the decision on the merits of March 4, 2014.
[25]
Therefore, the Court sides with the Plaintiffs
that the period prior to April 2011 must be included in the calculation of
costs. The Court also notes that the Defendants are asking to take into
consideration that it was the Plaintiffs who initiated the legal proceedings
and that the Defendants were “basically attempting to
protect themselves against attacks”. However, the Defendants filed a
first version of their counterclaims on May 28, 2007, which was later amended,
and sought several forms of relief against the Plaintiffs. Therefore, in the
period prior to April 2011, the Defendants were not only defending themselves
but were themselves pursuing counterclaims against the Plaintiffs. Hence, this
Court is of the view that the costs incurred before April 2011 should be
included in the calculation.
[26]
The Court acknowledges the case law pointing to
the imposition of fee awards totalling around one-third of the incurred legal fees,
amounting in this case to $423,894.00: see Consorzio, Ultima Foods,
Apotex and Philip Morris at para 6.
[27]
The Court is not prepared to increase the
percentage to 50% of the incurred legal fees as the Plaintiffs request. The
Court finds that the case law submitted by the Plaintiffs to support a further
increase to 50% of the legal fees indicates that such awards are granted in
exceptional circumstances, and the Court cannot confirm that such circumstances
occurred in the present case.
[28]
The Court is also of the view that the amount of
disbursements of $118,777.09 is supported by the evidence.
[29]
Finally, the Court must determine whether an
award equal to double the applicable amount for the period following the August
21, 2013 Offer is warranted.
[30]
Rule 420(1) states :
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Federal Courts Rules, SOR/98-106
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Règles des
Cours fédérales, DORS/98-106
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Consequences of
failure to accept plaintiff’s offer
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Conséquences de la non-acceptation de l’offre du demandeur
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420. (1) Unless
otherwise ordered by the Court and subject to subsection (3), where a
plaintiff makes a written offer to settle and obtains a judgment as
favourable or more favourable than the terms of the offer to settle, the
plaintiff is entitled to party-and-party costs to the date of service of the
offer and costs calculated at double that rate, but not double disbursements,
after that date.
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420. (1) Sauf
ordonnance contraire de la Cour et sous réserve du paragraphe (3), si le
demandeur fait au défendeur une offre écrite de règlement, et que le jugement
qu’il obtient est aussi avantageux ou plus avantageux que les conditions de
l’offre, il a droit aux dépens partie-partie jusqu’à la date de signification
de l’offre et, par la suite, au double de ces dépens mais non au double des
débours.
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[31]
The burden of proving that a settlement offer is
as favourable or more favourable than the final judgment lies with the party
requesting the application of Rule 420, in this case the Plaintiffs (Apotex
Inc v Sanofi-Aventis, 2012 FC 318 at para 30).
[32]
The Court has set out a number of factors to be
taken into account in this assessment, and those factors are :
39 In order to trigger the double
costs rule, an offer must be clear and unequivocal in that the opposite party
need only decide whether to accept or reject the offer (Apotex Inc. v.
Syntex Pharmaceuticals, [2001] FCA 137, [2001] F.C.J. No. 727 (QL), at
para. 10). The offer must also contain an element of compromise (or incentive
to accept) (Canadian Olympic Assn. v. Olymel, Société en commandite,
[2000] F.C.J. No. 1725 (QL), at para. 10). The offer must also be presented in
a timely fashion such that the benefit would still be derived from the opposite
party if accepted (Sammammas Compania Maritima S.A. v. Netuno (the) Action
in rem against the Ship "Netuno", [1995] F.C.J. No. 1442 (QL), at
paras. 30 and 31). Finally, if accepted, the offer must bring the dispute
between the parties to an end (TRW, supra, at p. 456). (MK Plastics
Corp v Plasticair Inc, 2007 FC 1029 at para 39).
[33]
Those factors have been met by the Plaintiffs:
the Offer was presented at least 14 days before the commencement of the
hearing; it was not withdrawn; it did not expire before the commencement of the
hearing; it was clear and unequivocal; it was presented in a timely fashion;
and it would have brought the dispute between the parties to an end. Also, the
Offer did contain an element of compromise as the Plaintiffs suggested that
there be no costs or that the costs would be reduced, depending on the date of
acceptance by the Defendants (Culhane v ATP Aero Training Products Inc,
2004 FC 1667 at para 6; Kirgan Holding SA v Panamax Leader (The), 2003
FCT 80 at para 12).
[34]
Given that those factors are met, I must
determine if the Offer is indeed as favourable or more favourable to the
Defendants than the judgment.
[35]
The Offer states that :
The Plaintiffs, H-D U.S.A., LLC and Harley-Davidson Motor Company, Inc. (“Plaintiffs”), offer to settle this
proceeding against the Defendants, Jamal Berrada, 3222381 Canada Inc. and El
Baraka Inc. (“Defendants”), in full satisfaction of all claims, on the following
non-severable terms:
1) The Defendants will consent to a
Judgment:
a) Declaring that the Plaintiffs are entitled to distribute,
advertise, offer for sale and sell throughout Canada HARLEY-DAVIDSON collateral
items, including clothing, that display the trade-mark SCREAMIN’ EAGLE;
b) Declaring that the sale in Canada of the Plaintiffs’
HARLEY-DAVIDSON collateral items, including clothing, that display the
trade-mark SCREAMIN’ EAGLE, does not and will not infringe or violate any valid
rights of the Defendants;
c) Dismissing the Defendants’ Counterclaim herein and the relief
and remedies sought thereunder;
d) If accepted on or before August 31, 2013, on a without costs
basis; and,
e) If accepted between September 1, 2013 and one (1) minute after
the commencement of trial, the Plaintiffs are awarded 40% of their costs under
Column III of Tariff B of the Federal Courts Rules.
[36]
In relevant part, the judgment states that :
1) Plaintiffs’
action is granted;
2) Plaintiffs are entitled to distribute, advertise, offer
for sale and sell collateral items, including clothing, in connection with
their trade-mark SCREAMIN’ EAGLE, in association with their registered
trade-mark HARLEY-DAVIDSON, throughout Canada but exclusively at
HARLEY-DAVIDSON dealerships; as this will not infringe any valid rights of
Defendants;
3) Defendants’ counterclaim under paragraph 7(b) and
sections 19, 20 and 22 of the Trade-marks Act are dismissed;
[…]
[emphasis
added]
[37]
The reduction of costs provided for in the Offer
proves favourable to the Defendants. However, the Offer and the judgment differ
in the use of SCREAMIN’ EAGLE by the Plaintiffs in that the Offer provides for
the distribution, advertisement, offering for sale and sale of HARLEY-DAVIDSON
items that display the trade-mark SCREAMIN’ EAGLE throughout Canada without any
restriction, whereas the judgment restricts the distribution, advertisement,
offering for sale and sale of the HARLEY-DAVIDSON items in connection with
their trade-mark SCREAMIN’ EAGLE at HARLEY-DAVIDSON dealerships in Canada.
[38]
The Plaintiffs presented no evidence with
respect to the possible impact of this restriction. Therefore, the Court cannot
compare the amount of costs payable by the Defendants as per the present
judgment with the amount possibly gained from the restriction to the
Plaintiffs’ right to distribute, advertise, offer for sale and sell their items
in Canada. As already stated, the burden of proving that the Offer was more
favourable to the Defendants than the judgment lies with the Plaintiffs, and
they have not convinced the Court accordingly. Hence, Rule 420 does not apply
in the present case and the Plaintiffs are not entitled to double costs for the
period following the August 21, 2013 Offer.
[39]
Therefore, after analyzing the submissions of
the parties, the Court awards the Plaintiffs a lump sum of $423,894.00 in fees,
plus disbursements in the amount of $118,777.09.
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