October 6, 2021, Southern District of New York – Plaintiff L&L Wings, Inc., by its attorneys, Davidoff Hutcher & Citron LLP, files a complaint against Beach Mart, Inc. (“BMI”), seeking reduction and disallowance of a claim filed by BMI or in alternative equitable subordination of the claim.
Debtor operates 26 beachwear retail stores under the WINGS mark throughout North Carolina, South Carolina, Florida, Texas, and California. Allegedly, the Debtor entered a trademark license agreement with Defendant that permitted beach wear stores’ operations under the trade name “Super Wings” or “Big Wings.” Sometime in or around 2011, a dispute arose between the Debtor and Defendant regarding Defendant’s use of the trade name “Super Wings.” The District Court rendered the judgment in favor of Defendant, awarding damages of $4,184,135.00 for each cause of action asserted by Defendant. The Debtor disputed the verdict. BMI requested the Court to enter judgment including treble damages of the ruling, according to the NC UDTPA. The Court issued a decision against the Debtor and awarded $15,868,068.49 towards damages to Defendant, which comprised actual damages for $4,184,135.00, trebling of actual damages for $8,368,270.00 under the jury’s finding of unfair and deceptive conduct, as prohibited under the NC UDTPA, NC. Gen. Stat. Section 75-1.1, prejudgment interest, attorney fees, and cost.
Plaintiff argues that the actual damages for $4,184,135 are arbitrary, unsupported by the evidence, and do not represent a reasonable calculation of economic loss. In addition, Plaintiff argues that the treble damages adjustment, the prejudgment interest, the previously paid fees, and the costs are like a punitive award or penalty. Further, Plaintiff contends that the judgment is disproportionate to the claims of the other creditors that arise in the ordinary course of the Debtor’s business. Accordingly, Plaintiff seeks to disallow or subordinate the actual damages claim, treble damages adjustment, prejudgment interest, previously paid fees, and costs for being grossly and unconstitutionally disproportionate to the alleged actual damages or purported economic injury suffered by Defendant. The Debtor also demands the avoidance of the obligation to pay the punitive damages claim as a fraudulent conveyance according to 11 USC. Section 548(a)(1).
Specifically, through his complaint, the Plaintiff seeks: (i) the reduction of the actual damages claim to reflect the level of actual damages; (ii) disallowance of the punitive damages claim under Section 502 of the Bankruptcy Code; (iii) equitable subordination of the punitive damages claim to claims of the Debtor’s other creditors under Section 510(c) of the Bankruptcy Code and Fed. R. Bankr. P. Rule 7001(8); (iv) partial avoidance of the obligation under the actual damages claim the avoidance of the obligation of the punitive damages claim as a fraudulent conveyance according to Sections 548 and 544(b) of the Bankruptcy Code as incorporating New York Debtor and Creditor Law (“DCL”) Sections 273, 274 and 275.
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