On February 26, 2025, the Supreme Court decided Dewberry Group, Inc. v. Dewberry Engineers Inc., No. 23-900, a case concerning corporate separateness and disgorgement awards for Lanham Act trademark infringement. The Fourth Circuit had affirmed a disgorgement award that treated defendant Dewberry Group and its non-party affiliates as a single corporate entity for the purpose of calculating revenues from trademark infringement. In an opinion authored by Justice Kagan, the Court unanimously vacated and remanded, holding that in making an award of “defendant’s profits” under the Lanham Act, a court may award “only profits properly ascribable to the defendant itself.”

In reaching this result, the Court declined to address key substantive issues that the plaintiff and Solicitor General had raised, including the scope of the “just-sum” provision of Section 1117(a) of the Lanham Act and the extent to which courts may look “behind a defendant’s tax or accounting records” to “identify the defendant’s true economic gain.”

The case arose from a trademark dispute between two similarly-named real estate development companies that operate in the Southeast. Dewberry Group, the defendant-petitioner, provides business services solely to about 30 separately incorporated entities that have no employees and that share the same owner as Dewberry Group, John Dewberry. Each of these affiliates owns a piece of commercial property for lease, and the affiliates earned tens of millions of dollars in profit from the rental income. Dewberry Group, by contrast, consistently operates at a loss and survives only through occasional cash infusions by John Dewberry.

The plaintiff, Dewberry Engineers, sued only Dewberry Group, not the affiliates. Nevertheless, Dewberry Engineers successfully sought to have the district court consider profits formally earned by the affiliates as part of the disgorgement award against Dewberry Group, due to their shared ownership structure.

The Fourth Circuit, affirming, had concluded that the district court did not “pierce the corporate veil,” but rather “considered the revenues of entities under common ownership with Dewberry Group in calculating Dewberry Group’s true financial gain from its infringing activities that necessarily involved those affiliates.” The Fourth Circuit noted that even though Dewberry Group did not “receive the revenues from its infringing behavior directly, it still benefited from its infringing relationships with its affiliates.” A contrary decision, it said, risked “handing potential trademark infringers the blueprint for using corporate formalities to insulate their infringement from financial consequences."

In vacating the award, the Supreme Court held that the statutory text—which allows for recovery of the “defendant’s profits”—refers only to the “party against whom relief or recovery is sought,” in this case the only named defendant, Dewberry Group. The Court also pointed to background principles of corporate separateness. Because the district court and Fourth Circuit opinions treated Dewberry Group and its affiliates as a single corporate entity and simply summed all the entities’ profits, the Court vacated and remanded.

The Court’s opinion declined to provide any further guidance on whether or how courts can consider earnings of related entities when awarding disgorgement under Section 1117(a) of the Lanham Act. The Court, for example, explicitly declined to address courts’ authority to consider profits flowing to corporate affiliates under the statutory provision allowing courts to “enter judgment for such sum as the court shall find to be just, according to the circumstances of the case” if “the court shall find that the amount of the recovery based on profits is either inadequate or excessive,” 15 U.S.C. § 1117(a), the so-called “just-sum” provision. Similarly, the Court stated “no view” on when courts can “look behind a defendant’s tax or accounting records to consider the economic realities of a transaction and identify the defendant’s true financial gain,” determining that those questions were up to lower courts to first address.

Justice Sotomayor authored a concurrence to “underscore that principles of corporate separateness do not blind courts to economic realities” or force courts “to accept clever accounting, including efforts to obscure a defendant’s true financial gain.” Echoing arguments raised by the Solicitor General, Justice Sotomayor suggested two examples for how courts “might consider accounting arrangements between a defendant and its affiliates in calculating a defendant’s profits.” First, she noted that where a company charges an affiliate below-market rates for infringing services, it “effectively assigns some portion of its revenues” to the affiliate. In such a circumstance, she suggested that the affiliate’s profits “might bear on what the company itself would have earned in an arm’s-length relationship” and could be considered in determining profits ascribable to the defendant. Second, she indicated that courts might consider evidence that a company “indirectly received compensation for infringing services” through affiliates, such as where there is evidence that a company charged below-market rates for infringing services and made up the difference via cash infusions from the common owner. Nevertheless, she concluded that the issue of how to evaluate such accounting arrangements had not been considered within “the right framework” by the lower courts and so agreed with the Court’s choice to decline to decide it. But she suggested that, on remand, the lower courts may explore the issue and even may wish to reopen the record.

Because the full Court’s opinion declined to address many issues, it provides limited guidance for parties and courts wrestling with disgorgement awards in trademark infringement cases where the defendant is part of a family of related entities. However, both Justice Sotomayor’s concurrence and the Solicitor General’s brief provide possible roadmaps for trademark plaintiffs who wish to argue that a named defendant’s formal profits do not reflect its true financial gain for a disgorgement award under the Lanham Act. The case also reminds plaintiffs that they must be thoughtful about which entities they name as defendants—and to consider amending their complaint if necessary—when a complex corporate structure might obscure how profits are recorded.