Docket: T-1591-15
Citation: 2024 FC 717
Ottawa, Ontario, May 9, 2024
PRESENT: The Honourable Justice Fuhrer
BETWEEN: |
ENERGIZER BRANDS, LLC AND ENERGIZER CANADA INC. |
Plaintiffs |
and |
THE GILLETTE COMPANY, DURACELL CANADA, INC., DURACELL U.S. OPERATIONS, INC., AND PROCTER & GAMBLE INC. |
Defendants |
COSTS ORDER AND REASONS
(Public Version with Redactions of Confidential Version Issued May 9, 2024)
I. Overview
[1] This dispute between the parties culminated in my earlier decision in Energizer Brands, LLC v Gillette Company, 2023 FC 804 [Energizer 2023]. I will refer to the Plaintiffs sometimes as “Energizer”
in these reasons, and the Defendants sometimes as “Duracell.”
[2] I provided the parties with an opportunity to make costs submissions after the issuance of the decision, if they were unable to reach an agreement on costs: Energizer 2023, above at para 273.
[3] Because the parties did not agree on the quantum of costs, they provided the Court with their submissions, including permitted reply and sur-reply submissions, as well as supporting affidavits.
[4] Energizer seeks a lump sum award comprised of (a) 25% of actual legal fees (less specified deductions) and (b) reasonable disbursements. They also have provided two alternative amounts for the Court to consider, based on the high end of Column IV and Column V respectively of Tariff B.
[5] Taking issue with my characterization of the outcome in Energizer 2023 as “split,”
Duracell also seeks a lump sum award, but comprised of 50% of its legal fees and subject to a multiplier of 150% because of rejected settlement offers.
[6] Having considered the parties’ submissions, supporting affidavits and applicable jurisprudence, and as explained below, I determine that Duracell is entitled to a lump sum costs award of $450,000, payable by Energizer. In my view, this amount is just and proportionate in the circumstances and reflects the objective of encouraging settlement.
[7] Set out below are applicable costs principles that I considered in the ensuing analysis which addresses the issue of divided or split success, the inapplicability of rule 420 and the relevant subrule 400(3) factors that I took into account in arriving at the above determination.
II. Applicable Costs Principles
[8] The Court has full discretion over the award and amount of costs: subsection 400(1) of the Federal Courts Rules, SOR/98-106 [Rules]. See Annex “A”
below for relevant Rules provisions. The determination of whether to award costs, to which party and how much is a fact-dependent exercise: Pharmascience Inc v Teva Canada Innovation, 2022 FCA 207 [Teva FCA] at para 20.
[9] Fairness and reasonableness are overarching considerations in making a costs award; it involves striking a balance between compensating the successful party and not burdening the unsuccessful party unduly: Janssen Inc v Teva Canada Ltd, 2022 FC 269 [Janssen] at para 8. See also rule 3.
[10] As a general principle, costs follow the event. The “event”
is less clear, however, where the result is split or divided. A ruling of “no-costs,”
thus, is not uncommon in the case of such an outcome, but by no means is it mandated: Mylan Pharmaceuticals ULC v Bristol-Myers Squibb Canada Co, 2013 FCA 231 [Mylan] at para 6. The Court retains the discretion to award costs to achieve certain goals, such as compensating the successful party, encouraging settlement and deterring abusive behaviour: Air Canada v Thibodeau, 2007 FCA 115 at para 24; Teva FCA, above at para 18; Janssen, above at para 7.
[11] Non-exhaustive factors that the Court can take into account in exercising its discretion include the result of the proceeding, the amounts claimed and recovered, the complexity of the issues, offers to settle regardless of whether they satisfy rule 420 (Teva FCA, above at paras 13-14), the amount of work, whether a party’s conduct tended to lengthen or shorten the proceeding, and whether any step in the proceeding was improper, vexatious or unnecessary, in addition to any other matter the Court considers relevant: subsection 400(3) of the Rules.
[12] Chief Justice Crampton canvassed general costs principles in Allergan Inc v Sandoz Canada Inc, 2021 FC 186 at paras 19-36. They include:
-indemnifying the successful party or parties;
-sanctioning behaviour that increases the duration and expense of the proceeding, or is unreasonable or vexatious;
-the Court’s broad discretion over the amount and allocation or apportionment of costs;
-whether to set costs with reference to Tariff B (the default level being the mid-point of Column III) or in a lump sum amount, further to subrule 400(4) and rule 407;
-whether to set a lump sum amount by beginning at the mid-point of the 25% to 50% range for a complex drug patent proceeding, or at the lower end of this range for other cases and then assessing the subrule 400(3) factors to determine if a higher or lower amount is warranted (per Seedlings Life Science Ventures, LLC v Pfizer Canada ULC, 2020 FC 505 at para 22); and
-assessing reasonable disbursements in full.
[13] In addition, lump sum awards may be appropriate for simple or complex matters where precise costs calculations would be complicated and burdensome: Nova Chemicals Corporation v Dow Chemical Company, 2017 FCA 25 [Nova FCA 2017] at para 12, aff’d on other grounds 2022 SCC 43. Awarding lump sum costs avoids granular analyses that devolve into an accounting exercise: Nova FCA 2017, above at paras 11, 15.
[14] Although Chief Justice Crampton noted the trend in case law to set the percentage of fee recovery between 25% and 50%, a lower or higher percentage may be warranted in the circumstances of the particular case: Loblaws Inc v Columbia Insurance Company, 2019 FC 1434 at para 15.
[15] Expenses may be reasonable if they are justified in the context of the action; the decision to incur an expense must be prudent and reasonable in the circumstances at the time: Janssen, above at para 10.
III. Analysis
[16] In arriving at the costs award in this matter, I have taken into account the above principles and the considerations discussed next.
(1) Divided Success
[17] Notwithstanding that each side to this dispute claims victory, I remain of the view that success was split or divided: Bertrand v Acho Dene Koe First Nation, 2021 FC 525 [Bertrand] at para 14.
[18] Energizer asserts that it is the “successful”
party because it obtained a permanent injunction and damages in the amount of $179,000.
[19] Duracell, on the other hand, premises its asserted entitlement to costs on Energizer’s lack of success on several key issues, as well as the settlement offers it made, that were rejected or countered, in the context of the overall outcome of the litigation.
[20] The case before me is not analogous, in my view, to the example considered by Justice Grammond in Bertrand, above at para 13. There, it is evident that if a defendant to a patent infringement action were to succeed on only one of the issues of non-infringement and invalidity, then logically the action would fail regardless of which issue prevailed, and the defendant would be entitled to costs.
[21] Here, however, I am persuaded that conceptually, the case before me involves different parts with different outcomes (i.e. the meaning ascribed to “divided success”
in Bertrand, above at para 12).
[22] For example, on the issue of whether Duracell used one or more of Energizer’s registered trademarks in a manner likely to depreciate the value of the goodwill attaching to the trademark(s), pursuant to subsection 22(1) of the Trademarks Act, RSC 1985, c T-13, Energizer prevailed in respect of at least two of its registered trademarks in issue, ENERGIZER and ENERGIZER MAX: Energizer 2023, above at paras 132, 145. As a result, Energizer was entitled to the remedies of a permanent injunction regarding these registered trademarks and damages in the amount of $179,000: Energizer 2023, above at paras 261, 265.
[23] Otherwise, Duracell prevailed regarding the issues of false or misleading statements or descriptions, pursuant to paragraphs 7(a) and (d) of the Trademarks Act, and subsection 52(1) of the Competition Act, RSC 1985, c C-34, and whether Duracell’s activities were permitted by agreement with Energizer: Energizer 2023, above at paras 158, 166, 232, 271.
[24] The fact that Energizer’s level of success on the issues where it succeeded was not as comprehensive as what was claimed, does not make the decision any less divided or split, in my view. The extent of success, however, is a factor the Court can take into account in assessing costs. See, for example, paragraphs 400(3)(a) and (b) of the Rules.
(2) Application of Subrules 420(1) and 420(2)
[25] I find that neither side to the dispute benefits from either subrule 420(1), in the case of Energizer, or subrule 420(2), in the case of Duracell. In other words, this is not a case warranting double costs (or even costs plus 50%). Instead, the offers to settle will be considered in the context of paragraph 400(3)(e), bearing in mind that the latter should not be used as a less onerous version of rule 420: Halford v Seed Hawk Inc, 2004 FC 1259 at para 18.
[26] Contrary to Duracell’s submissions, I find that the Defendants made three, not two, offers to settle in writing, as demonstrated by Energizer’s supporting affidavit of Marta Wysokinski, a law clerk with Energizer’s counsel. The first offer in evidence was made in 2017 and contained terms enjoining the Defendants from using, displaying, or depreciating the goodwill attaching to, the trademarks ENERGIZER or ENERGIZER MAX, and agreeing to pay an amount totalling $35,000, inclusive of interest and costs. As well, the offer was open until five minutes after the beginning of the trial or until otherwise withdrawn. In other words, the first offer contained terms contemplating the very injunction granted at trial, but an amount well below the amount of damages granted.
[27] Regarding the second and third settlement offers, I am not persuaded, as Duracell submits, that although they do not comply technically with rule 420, they nonetheless fall within the spirit of the rule. I note in particular that Duracell’s second and third offers in 2021 and 2022 respectively were monetary only with no term or terms involving injunctive relief.
[28] Of the two, the second offer in 2021 for the amount of $150,000, came closest to the amount of damages awarded at trial, namely, $179,000. That said, it did not meet the precondition of paragraph 420(2)(a) because the Plaintiffs were not awarded an amount less favourable than $150,000.
[29] The third offer in 2022 came in considerably higher at $500,000; in other words, this amount was more favourable than the damages award Energizer achieved at trial. The offer was made, however, less than 14 days prior to the start of the trial in January 2022 and, thus, the timing of it contravened paragraph 420(3)(a).
[30] The Wysokinski affidavit describes that |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| || ||||||||||||||||||, but that Energizer does not rely upon them for its costs submissions. Strictly speaking, that did not prove to be the case because the Plaintiffs’ reply costs submissions and the Defendants’ sur-reply costs submissions delve into the settlement negotiations in which the parties engaged days before the trial. These negotiations will be addressed further in respect of the subrule 400(3) factors that I consider relevant, to which I turn next.
(3) Subrule 400(3) Factors
[31] I find that the following factors are relevant to my analysis of the costs award: (a) the result of the proceeding, the amounts claimed and the amounts recovered; (b) the complexity of the issues and the amount of work; (c) the settlement negotiations; (d) the parties’ conduct; and (e) disallowed expert evidence.
(a) Result of the proceeding; amounts claimed and amounts recovered – paragraphs 400(3)(a) and (b)
[32] In my view, these factors, taken together, favour the Defendants.
[33] While I have found that the result of the action was divided, that is not to say that it was an even division. The Plaintiffs’ claim of depreciation of goodwill included not just ENERGIZER and ENERGIZER MAX, but also two registrations for versions of Energizer’s iconic “spokes-character”
rabbit or bunny embodied in registration Nos. TMA399312 and TMA943350. The Plaintiff was unsuccessful on the established facts in showing depreciation of goodwill in the latter two trademarks on which the damages claim substantially rested.
[34] Further, as mentioned, the Defendants successfully defended the claims for false or misleading statements or descriptions and established, in the process, that their impugned activities were permitted by agreement with the Plaintiffs. The issue of false or misleading claims necessitated significant battery testing and financial expert evidence by both sides.
[35] In addition, while the Plaintiffs were awarded costs in the amount of $179,000, this is essentially a nominal amount in the context of the overall claim for approximately $9 million in damages or an accounting of profits for just under $11.5 million, plus pre- and post-judgment interest, as well as punitive damages.
(b) Complexity of the issues; amount of work – paragraphs 400(3)(c) and (g)
[36] I determine that, in the circumstances, these are neutral factors.
[37] While I do not disagree with the Defendants regarding the complexity of the action, which included expert evidence in three disciplines and detailed factual evidence from varied sources, jurisprudence guides against the trial judge telling a party, with the benefit of hindsight, how they could or should have conducted the litigation: Travel Leaders Group, LLC v 2042923 Ontario Inc (Travel Leaders), 2023 FC 613 at para 37.
[38] In other words, the fact that Energizer ultimately was not successful with several key claims does not mean necessarily that those claims were inherently baseless or without merit. I point in this regard to the outcome of the Defendants’ motion for summary judgment and the appeal of that outcome that framed the trial of this matter: Energizer Brands, LLC v The Gillette Company, 2018 FC 1003, appeal allowed in part and cross-appeal dismissed 2020 FCA 49.
(c) Settlement negotiations – paragraphs 400(3)(e) and 400(3)(o)
[39] In my view, these factors weigh in Duracell’s favour.
[40] Jurisprudence confirms that the Court may consider a genuine settlement offer made in good faith when assessing costs, despite the inapplicability of rule 420: Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC, 2023 FC 780 [Eli Lilly] at para 32; UPL NA Inc v Agracity Crop & Nutrition Ltd, 2023 FC 163 at para 16. The fact that an offer may not comply with the timeliness requirements of subrule 420(3), for example, does not preclude the Court’s consideration of the offer under subrule 400(3): Teva FCA, above at para 13.
[41] The Federal Court of Appeal teaches that in connection with the exercise of its discretion, it is appropriate for the Court to consider whether “the offer had substance and addressed the essential matters, was made in good faith, was a serious effort to settle the litigation, contained significant compromise, and was worthy of serious consideration”
: Teva FCA, above at paras 23-24.
[42] I find that Energizer’s settlement positions shortly before the start of the trial were unreasonable and were not indicative of significant compromise. Notwithstanding that the parties engaged in settlement discussions during the pendency of the action and even in mediation in the early days (i.e. in 2017), the eve-of-trial negotiations foundered. They did so in part, in my view, because |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. As well, Energizer refused to discuss with Duracell why Energizer was seeking relief without addressing causation, an issue that proved to be Energizer’s undoing at trial insofar as the damages award is concerned: Energizer 2023, above at paras 260-265.
[43] I contrast Energizer’s settlement stance with Duracell’s willingness to double its previous settlement offer to $1,000,000, with reference to |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||. Further, Duracell’s last offer before trial was significantly more than what Energizer ultimately achieved at trial. In my view, the offer of $1 million had substance, addressed the essential matters, was made in good faith, was a serious effort to settle the litigation, contained significant compromise, and was worthy of serious consideration.
(d) Parties’ conduct – paragraphs 400(3)(i) and 400(3)(k)
[44] I also find that these factors are neutral.
[45] Each side complains about the other’s conduct in this action.
[46] For Energizer’s part, it submits that Duracell failed to have quality controls in place regarding the stickering process and failed to make efforts not only to cease shipping the impugned packages displaying ENERGIZER and ENERGIZER MAX to Canada (from January to September 2015), but also to remove them from the market: Energizer 2023, above at para 245. Energizer also points to Duracell’s delay in producing extensive documents and answers until October 2021. Energizer asserts that the latter conduct contributed to increased fees and disbursements for finalizing its expert reports.
[47] For its part, Duracell submits that Energizer increased the complexity of the proceeding with serious unmeritorious allegations including fraud, did not attempt to prove causation, attacked Duracell’s witnesses in an inflammatory manner and inappropriately sought punitive damages.
[48] In my view, neither side has exhibited such extreme behaviour that in itself warrants costs consequences. Further, each side’s submissions on this point seemingly urge the Court to conduct an autopsy of the trial and, with the benefit of hindsight, to take the other party to task for their litigation strategies, something this Court’s jurisprudence cautions against: Eli Lilly, above at para 33, citing Bauer Hockey Ltd v Sport Maska Inc (CCM Hockey), 2020 FC 862 at para 32.
(e) Disallowed expert evidence – paragraph 400(3)(n.1)
[49] Although this factor does not weigh significantly in the costs analysis, I find it nonetheless is relevant and warrants comment.
[50] In my view, it is more appropriate to discount the expense related to Dr. Kolsarici’s expert evidence by 50%, rather than the 25% proposed by Duracell.
[51] At trial, I disallowed or excluded the portion of Dr. Kolsarici’s expert report dealing with the Difference in Difference [DID] analysis, specifically paragraphs 258‑272, because of Dr. Kolsarici’s failure to comply with paragraph 3(i) of the Court’s Code of Conduct for Expert Witnesses (under rule 52.2): Energizer 2023, above at para 71.
[52] Further, I found that the failure of Dr. Kolsarici to disclose the involvement of her PhD student in the DID analysis was prejudicial to Energizer and was not in line with similar disclosures by other experts whose evidence was tendered in the action: Energizer 2023, above at para 69.
IV. Conclusion
[53] Balancing the above factors, and to promote the objective of encouraging settlement, I conclude that it is appropriate to award costs against Energizer.
[54] In the circumstances, I determine that Duracell is entitled to costs payable by Energizer in the amount of $450,000, comprised of 13% of its legal fees (i.e. 25% divided by 2 and rounded up, resulting in the amount of $272,512.47) and 50% of its reasonable disbursements (i.e. resulting in the amount of $173,632.88), with the total ($446,145.35) rounded up.
[55] Duracell also is entitled to 5% per annum in post-judgment interest.