Judge Awards Hyundai $551,000 in Attorneys’ Fees in Novel Gray Market Trademark Case

The order stemmed from allegations that the defendants Midwest Industrial Supply Co. and related Minnesota entity Alliance Automotive LLC illegally sold “gray market” auto parts to U.S. dealers as “genuine” Hyundai parts, when the parts were only approved for sale in the Korean market and had not been imported through Hyundai’s authorized chain of distribution, according to Law360.

The judge said the fees were warranted because the defendants purportedly engaged in malicious or fraudulent behavior, including “telephone spoofing,” in which Midwest manipulated caller ID to trick dealers into thinking “Hyundai Motor” was calling them. The defendants also did not deny that they bribed potential customers to buy their parts, including in one instance where a manager at a Las Vegas dealership was offered “enough money to pay her mortgage,” if she made a purchase with the companies, the judge said.

In addition, Midwest’s “evasive litigation tactics” to hide the identity of Alliance Automotive, was enough to make the case an “exceptional” under the trademark laws which merits its attorney fees to Hyundai, according to the judge.

Last year, the judge entered judgment on the defendants’ Rule 68 offer for $75,000 to resolve the suit, which Hyundai had accepted. Although, the judgment was amended that April to allow Hyundai to file a motion for attorney fees, which Hyundai said the earlier offer did not include. The court agreed and amended the judgment to allow Hyundai to file a motion for its attorneys’ fees.

Pillsbury Litigation partner Kenneth Keller, lead trial counsel for Hyundai, said that the district court's “order finding Hyundai’s trademark infringement action to be an exceptional case and its determination that Hyundai was the prevailing party after accepting the defendants’ Rule 68 offer, and awarding Hyundai its attorneys’ fees and costs in full, validated Hyundai’s ongoing efforts to stop the sale of gray market Hyundai parts. The court confirmed that a Rule 68 offer must explicitly include attorneys’ fees, which the defendants’ offer did not, and that engaging in aggressive and misleading marketing of grey market parts as ‘genuine’ may make the case ‘exceptional’ for the purpose of awarding fees and costs. Hyundai has been at the forefront in the automotive industry enforcing its trademarks against gray market parts and Hyundai was extremely satisfied by the court’s order and the judgment it obtained in this case.”

 Hyundai commented on the order: “We are very pleased with the thoughtful order by Hon. Judge James C. Mahan awarding Hyundai Motor America its full legal fees and costs against Midwest Industrial Supply Company and Alliance Automotive. Hyundai will continue to protect its customers and dealers from deceptive trade practices and unauthorized gray market and counterfeit auto parts. Hyundai owners deserve quality parts they can trust whenever they choose Hyundai Genuine Parts offered by our dealers, and this case represents Hyundai Motor America’s commitment to delivering on that promise.”

 “This was an incredible result for Hyundai and helps send a message that we will protect our dealers and protect our brand,” Keller concluded.

According to Law360, this is the latest victory Hyundai has recently scored over gray market auto parts. In February, a North Carolina federal judge ordered a company that admitted to willfully infringing Hyundai's trademarks by illegally selling counterfeit parts to pay $5 million to the automaker.

In addition to Ken Keller, the Pillsbury team included Intellectual Property counsels Vijay Toke and Chris Stretch and associate Zandir Morton.