Federal District Court Finds Issue Preclusion based on TTAB Fraud Finding:

Rebeccah Gan

February 16, 2016

Following the U.S. District Court for the District Court of Maryland’s recent decision applying issue preclusion for a TTAB priority finding in Ashe v. PNC Financial Services Group, Inc., Case No.: PWG-15-144 (D. Md. November 17, 2015) (http://www.wenderoth.com/news/federal-district-court-cites-supreme-court-decision-in-bb-hardware-v-hargis-and-applies-issue-preclusion-based-on-ttab-priority-findings-), the U.S. District Court for the Eastern District of Virginia has now applied issue preclusion in the context of a fraud finding in a trademark infringement action.

In Nationstar Mortgage, LLC. v. Mujahid Ahmad and Nationstar Mortgage, Inc., Civil Action No. 1:14-cv-1751 (E.D. Va. December 17, 2015), the District Court cited B&B Hardware v. Hargis Industries, Inc., 135 S. Ct. 1293 (2015), and gave preclusive effect to the Board’s fraud ruling.

In Nationstar Mortgage LLC v. Mujahid Ahmad, 112 USPQ2d 1361 (TTAB 2014) [precedential], the TTAB found that the Defendant, a Virginia-based real estate agent and mortgage broker, had committed fraud on the USPTO when he filed a Section 1(a) use-based application, as the Defendant knew or should have known that he was not using the NATIONSTAR mark in commerce for all the services identified in the application.

The Defendant did not appeal the Board’s ruling, but continued to offer real estate and mortgage services under the “NATIONSTAR” mark, and the Plaintiffs sued based on trademark infringement, unfair competition, and fraud.

As to the fraud claim, the Eastern District noted that the elements for issue preclusion were met because the issue (fraud) was identical; the fraud finding was “critical and necessary” to the Board’s decision, and because the other rules of collateral estoppel were “carefully observed,” namely, that the Board’s decision was a final decision and the Defendant, who was represented by counsel, had a “full and fair opportunity to litigate” the fraud claim during the Board proceeding.

As a result, the District Court entered summary judgment on Plaintiff’s fraud claim, as well as the Plaintiff’s trademark infringement and unfair competition claims.