$700,000 damages award forfeited in Beanie Babies Case

In Ty Inc v Softbelly's Inc (Civ 00 C 5230 (ND Ill, February 9 2005)) - a case on remand from the US Court of Appeals for the Seventh Circuit - the US District Court for the Northern District of Illinois has found evidence of witness tampering and forfeited a $700,000 damages award to the plaintiff.

Ty Inc, the manufacturer of the small plush stuffed toy animals Beanie Babies, filed an action for trademark infringement against Softbelly's Inc for its use of the name Screenie Beanies for a computer screen cleaner in the shape of a stuffed toy. The district court judge issued a verdict for Ty as a matter of law and awarded it $700,000 in damages. Softbelly filed a motion to vacate that order based on witness tampering. The district court judge denied that motion. The ruling was appealed to the Seventh Circuit, which reversed the district court's decision in Ty's favour as well as the denial of Softbelly's motion to vacate. The case was remanded to the district court for further proceedings, including a new trial (see Not yet in the bag: BEANIES Case remanded).

On remand, the district court held evidentiary hearings on May 21 2004 and October 1 2004 specifically on the issue of witness tampering. The witness tampering claims stemmed from a telephone call that the principal of Ty placed to a potential Softbelly witness.

Softbelly had arranged to have Harold Nizamian testify as an expert witness that the term 'Beanies' was generic when used in connection with soft plush toys. Nizamian based his opinion on his decades of working in the plush toy industry. The day before Nizamian was to testify, Ty's principal, Ty Warner, called Nizamian. Nizamian and Warner gave different accounts of the substance of that conversation. However, in its February 2005 opinion, the district court specifically found that it did not credit Warner's version of the telephone conversation and instead found that Warner had engaged in witness tampering. According to the court, Warner dissuaded Nizamian from testifying during that telephone conversation, and, as a result of the telephone call, Nizamian did not testify. In addition, the court found that Warner lied under oath at the evidentiary hearing about the nature of the telephone call.

The court invoked its inherent power to sanction Ty. Finding that the case did not warrant dismissal, the court instead forfeited the $700,000 damages award and granted Softbelly its expenses and attorneys' fees incurred with respect to the post-trial motion.

Leigh Ann Lindquist, Sughrue Mion PLLC, Washington DC