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Choice Hotels International, Inc. v. Frontier Hotels, Inc.

United States District Court, S.D. Texas, Houston Division

May 22, 2018

Choice Hotels International, Inc., Plaintiff,
v.
Frontier Hotels, Inc., et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Gray H. Miller United States District Judge.

         Pending before the court is plaintiff Choice Hotels International, Inc.'s (“Choice Hotels”) unopposed motion for damages in its lawsuit against defendants Frontier Hotels, Inc., Muhammad Khan, and Abdus Salam (collectively, “Defendants”). Dkt. 23 (asking the court to rule on Dkt. 19).[1]Having considered the motion, evidence, and applicable law, the court is of the opinion that the previously denied portion of the motion should be GRANTED.

         I. Background

         This is a trademark infringement case. Dkt. 18 at 1. Choice Hotels owns twenty-four different trademark registrations related to the “COMFORT” family of marks. Id. In 2008, Choice Hotels entered into a franchise agreement with Defendants. Id. at 2. Under that agreement, Defendants could operate a COMFORT INN® but had to stop using the marks upon termination. Id. Defendants breached. Id. On two occasions, Choice Hotels alerted Defendants as to the breach. Id. On both occasions, Choice Hotels gave Defendants a chance to cure. Id.

         After Defendants did not cure, Choice Hotels terminated the agreement and instructed Defendants to stop using any of its registered trademarks. Id. Defendants did not stop. Id. Instead, Defendants continued to use the marks for over a year including up to the point Choice Hotels filed its supplemental brief. Dkt. 19 at 6-7. Although Defendants removed some signs after this suit began, Defendants continued to use the marks in photographs posted to third-party booking websites and on roadside signs. Id. During discovery, Defendants provided incorrect statements about when they removed the signs. Id. Throughout this period, Defendants knew they needed to stop using the marks yet continued to do so anyway. Defendants even ignored the court's order that permanently enjoined their use of those marks. Dkt. 18.

         1. Income, expenses, and profits

         According to profit-loss sheets from December 2014 to February 2016, Defendants earned a monthly average income of $58, 970.28 and accrued $48, 646.86 in monthly expenses.[2] Dkt. 19 at 8. From December 2014 through February 2016, Defendants reported $190, 641.69 in profits. Id. Because Defendants did not provide profit-loss documentation for March through August of 2016, Choice Hotels estimates based on figures from the previous year. Id. at 9. Specifically, Choice Hotels estimates that Defendants earned $61, 940.56 in profits over those six months. Id.[3] Adding together Defendants' reported profits of $190, 641.69 and the estimated profits of $61, 940.56, Choice Hotels calculates Defendants' total profits for December 2014 through August 2016 as $252, 582.25. Id.

         2. Franchise fees

         Under the franchise agreement, franchisees owed Choice Hotels 9.5% of their gross room revenue (not net profits). Dkt. 17-25. From December 2014 through February 2016, Defendants' total income was $917, 816.89. Dkt. 19. Using the average monthly income of $58, 970.28, Defendants' estimated total income for March through August 2016 was $358, 825.34. Together, Defendants' gross room revenue was $1, 273, 642.23.

         II. Analysis[4]

         The Lanham Act provides monetary relief for successful trademark infringement claims. 15 U.S.C. § 1117. Under § 1117(a), a plaintiff can recover: (1) defendant's profits; (2) its actual damages; and (3) the costs of the action. See 15 U.S.C. § 1117(a). Under that subsection, the court can award up to three times actual damages. Id.; see also Ga.-Pac., 781 F.3d at 717. If the court finds that a defendant intentionally infringed a counterfeit mark, the court can: (1) treble plaintiff's actual damages or defendant's profits; and (2) award reasonable attorneys' fees. 15 U.S.C. §1117(b)(1); see also Ga.-Pac., 781 F.3d at 717; Yah Kai World Wide Enters. Inc. v. Napper, 292 F.Supp.3d 337, 364 (D.C. Cir. 2018) (accord). “Great latitude is given the district court in awarding damages under the Lanham Act.” Reservoir, Inc. v. Truesdell, 1 F.Supp.3d 598, 617 (S.D. Tex. 2014) (Atlas, J.) (quoting Martin's Herend Imports, Inc. v. Diamond & Gem Trading USA, Co., 112 F.3d 1296, 1304 (5th Cir. 1997)).

         1. Defendants' profits

         Choice Hotels can recover Defendants' profits. 15 U.S.C. § 1117(b). Section 1117(b) directs the court to first determine Defendants' profits under § 1117(a). See Id. (“in assessing damages under [§ 1117(a)] . . . in a case involving . . . a counterfeit mark . . . the court shall . . . enter judgment for three times such profits or damages, whichever amount is greater . . . if the violation consists of intentionally using a mark . . . knowing such mark is a counterfeit mark.”). For profits, “the plaintiff shall be required to prove defendant's sales only.” 15 U.S.C. § 1117(a). Defendants must “prove all elements of costs or deductions claimed.” Id. Defendants did not respond, let alone claim any deductions.

         Choice Hotels calculated Defendants' profits as $252, 582.25. Dkt. 19 at 8. The court finds that the record supports that calculation. See Dkt. 19-5; Dkt. 19-9 at 2. Specifically, Choice Hotels provided evidence of Defendants' profit-loss sheets from December 2014 to February 2016 amounting to $190, 641.69.[5]Id. Between March and August of 2016, Choice Hotels estimates Defendants received $61, 940.56 in profits. Accordingly, ...


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