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Supreme Court Hears Challenge to $43 Million Disgorgement Award Tied to Affiliate Profits
Summary
At oral argument in Dewberry Group v. Dewberry Engineers, petitioner's counsel argued the Lanham Act permits disgorgement only of a defendant's own profits and that the Fourth Circuit erred by attributing $43 million in affiliate profits to a defendant that had zero net profits; government counsel urged courts can probe "true gain" in limited circumstances under the statute's "just"-sum provision.
The Supreme Court heard arguments over whether a court may order disgorgement under the Lanham Act based on profits earned by legally separate affiliates, a dispute that could reshape remedies in trademark cases.
Counsel for the petitioner, identified in the record as Mr. Hungar, told the justices the Lanham Act authorizes disgorgement of a defendant's profits but "petitioner had no profits to disgorge," and the Fourth Circuit's decision to treat the defendant and its affiliates as a single corporate entity and attribute $43,000,000 in affiliate profits to the defendant was unlawful. "The disgorgement award is unlawful under the Lanham Act and should be reversed outright," he said.
Hungar relied on a line of precedents that presume corporate separateness unless Congress speaks clearly, citing Best Foods and decisions that limit equitable remedies. He argued the record shows petitioner did not receive the affiliate revenues and that the courts below effectively disregarded corporate form without asserting…
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