How one seller resolved damages exposure in a SAD scheme case

A federal order arrived before the seller knew a lawsuit existed. The Etsy shop was frozen. The payment account was locked. And the complaint named damages figures that looked, at first read, like a business-ending number. That sequence – notice coming after the freeze – is the defining feature of Schedule A litigation, and it is the moment when the decision a seller makes in the next 48 to 72 hours shapes everything that follows.

TL;DRA Schedule A defendant on Etsy faces a temporary restraining order (TRO) that freezes marketplace and payment funds before the seller is served, creating immediate cash-flow damage alongside the formal damages exposure in the complaint. Being named does not mean an automatic loss. The realistic path involves challenging the order, testing jurisdiction and joinder, and reaching a settlement that resolves the damages claim at a fraction of the headline number – often before the case reaches a full hearing on the merits.

This case study walks through one anonymized matter: how the situation developed, what was actually happening procedurally and commercially, how we structured the response, and what the experience teaches other Etsy sellers who find themselves named as Schedule A defendants.

What was the seller's situation?

The seller operated a handcraft and home-goods Etsy shop that had been trading for several years. The listings in question featured a design element that a US brand owner claimed infringed its registered trademark. The seller had sourced the products from a domestic wholesaler who had, in turn, sourced them through a multi-tier supply chain with overseas origin.

In late winter 2026, a US federal court issued a TRO as part of a Schedule A complaint. The complaint named a large group of defendants – the kind of broad, multi-defendant filing that practitioners call the SAD scheme because it is engineered to obtain emergency relief against dozens or hundreds of sellers simultaneously. The seller was one of many on the Schedule A list attached to the complaint.

The immediate effect was concrete. Etsy restricted the shop. The payment account held a mid-four-figure balance that could not be disbursed. The seller had outstanding inventory costs and supplier invoices due within weeks. When the seller found us, the overriding question was not abstract – it was "how do I get my money back, and what does this damages number actually mean for me?"

In matters we handle regularly, the panic around the headline damages figure in a Schedule A complaint is understandable but often disproportionate to the realistic exposure. The Lanham Act permits statutory damages at significant multiples per counterfeit mark per type of goods, and plaintiffs name the highest permissible ceiling in the complaint. That number and the number a defendant actually pays at resolution are rarely the same.

What was really happening: the procedural and commercial reality

A Schedule A TRO is designed to be obtained on an ex parte basis – meaning the court grants it without hearing from the defendants first. The plaintiff presents evidence of alleged infringement and argues that giving defendants advance notice would allow them to move funds or remove listings before the order can take effect. Courts have routinely granted these orders in trademark infringement cases involving e-commerce defendants, particularly where counterfeiting is alleged.

That procedural structure creates the defining asymmetry of this type of litigation. The seller's funds are frozen by court order before the seller has had any opportunity to contest the underlying claims. The freeze is not a finding of liability; it is a provisional remedy. That distinction matters enormously for strategy.

Three realities shaped this seller's position when we assessed the file.

First, the seller was one of many defendants in the same complaint. In Schedule A filings of this kind, defendants are joined together for procedural efficiency – a practice courts have scrutinized in recent years on misjoinder grounds. When defendants are unrelated to each other and the only common thread is the same plaintiff and a similar alleged infringement, there is a genuine argument that joinder is improper. That argument, if raised, can affect both the court's handling of the case and the plaintiff's willingness to settle economically.

Second, the seller had documentation. The product had been purchased from a domestic wholesaler. There were invoices. There was correspondence. The seller had not manufactured the allegedly infringing goods and had not imported them. The innocent-seller doctrine under the Lanham Act, while not a complete defense to a trademark claim, is highly relevant to damages and to the equities of the case. For a detailed discussion of that doctrine's relevance to resellers and marketplace sellers, see our guide on what to know when an innocent seller is wrongly named.

Third, the plaintiff was a serial filer. The counsel on the other side had run similar Schedule A campaigns. Serial filers in this space are motivated by efficiency and volume; they are almost always willing to settle defendants out of the case on terms that make economic sense for both sides, because litigating every defendant to judgment is expensive and slow. That dynamic affects the negotiating environment from day one.

We also reviewed the specific allegations. The claim was trademark infringement, not a counterfeit-goods claim in the strict sense. That matters for damages. Statutory damages for counterfeiting under the Lanham Act can reach significantly higher ceilings per mark per type of goods than ordinary infringement damages. If the allegations, on closer reading, did not fully support the heightened counterfeiting standard, that weakness in the damages case creates leverage.

How we structured the response

The immediate priority was the asset freeze. Everything else – damages exposure, settlement, eventual dismissal – depends on having liquidity to operate and negotiate.

We reviewed the TRO and the supporting evidence the plaintiff had submitted to the court. The question was whether the order had been obtained on a sufficient factual basis and whether there was a procedural basis to move to dissolve or modify it. In this matter, the bond the plaintiff had posted as security for the TRO was modest relative to the frozen balance – a factor that supports a motion to modify the freeze amount. We prepared a motion targeting the scope of the freeze, not waiting for the preliminary injunction hearing.

In parallel, we made contact with plaintiff's counsel to open informal settlement discussions. This is not a sign of weakness; in Schedule A litigation, it is the standard operating procedure for defendants who have a legitimate position. Plaintiff's counsel received our letter outlining the seller's sourcing documentation, the innocent-seller position on damages, and the misjoinder argument. We were explicit: the seller was prepared to litigate the jurisdictional and joinder questions if settlement terms were not reasonable.

The approach here tracks the broader strategy we describe in the complete guide to Schedule A / TRO defense for sellers – use the procedural tools that are available (jurisdiction, joinder, bond challenges) as both legitimate defenses and as settlement leverage, rather than treating them as all-or-nothing litigation positions.

The seller's decision points during this phase were real. Should we contest jurisdiction aggressively and risk antagonizing a plaintiff who might then deprioritize settlement? Should we file the motion to modify the freeze before or after making the settlement approach? How much of the sourcing documentation should we show at the pre-settlement stage versus hold back for litigation?

These are judgment calls, not mechanical steps. In our view, showing enough documentation to establish the innocent-seller argument as credible – without disclosing every detail of the supply chain that might expose the wholesaler to a separate proceeding – was the right calibration here. The goal was to make resolution the path of least resistance for plaintiff's counsel.

The outcome and what it actually looked like

Over the course of approximately ten weeks from the date we were retained, the matter moved from a frozen account and an open damages exposure running to a high statutory ceiling, to a negotiated resolution. The frozen balance was partially released during the pendency of the discussions once the motion to modify was briefed; the remainder cleared at settlement.

The resolution took the form of a consent judgment and permanent injunction. The seller agreed not to sell the specific design at issue going forward. The damages figure in the final agreement was a fraction of the number in the original complaint – consistent with what we see in similar matters where a seller has documentation, an innocent-seller position on damages, and counsel who engages early.

The shop itself was not permanently deactivated. Because the resolution was structured as a consent judgment with specific carve-outs, the seller could return to the platform and continue operating other listings that had no connection to the infringement claim. Supply chain review and product vetting were part of the undertakings, which is standard in consent judgments of this kind.

For a parallel account of how a reseller navigated a brand-protection suit in a related context, see our case study on how one seller resolved a reseller named in a brand protection suit.

What this case teaches other Etsy sellers

The myth that runs through most of the first calls we receive in Schedule A matters is this: being named means you lost, and the only question is how much you pay. That is wrong in most cases, and it was wrong here. What being named means is that a court has issued provisional relief based on one side's presentation of the facts. You have not been heard yet. The order can be challenged, modified, or dissolved. The damages figure is a ceiling, not a floor. Settlement is almost always available, and available sooner than sellers assume.

Several lessons emerge from this matter that apply broadly across Etsy Schedule A cases.

Acting in the first 48 to 72 hours is material. The window between learning about the TRO and the preliminary injunction hearing – where the court will decide whether to extend the freeze – can close quickly. Filing a motion or opening settlement discussions before that hearing changes the procedural posture meaningfully.

Documentation of the supply chain should be gathered immediately, even before you know whether you will need it. Invoices, purchase orders, import records, correspondence with the wholesaler – all of it should be located and preserved the moment you learn about the case. In the matter described here, the seller had this documentation and could produce it promptly. Sellers who cannot produce sourcing records face a harder innocent-seller argument.

The damages ceiling in the complaint is a negotiating starting point. Plaintiff's counsel in serial Schedule A campaigns is usually not trying to collect the full statutory ceiling from every defendant; they are trying to exit as many defendants as possible on terms that cover their costs and create a deterrent. A seller with a documented position and counsel who understands that dynamic is in a much better negotiating posture than a seller who has either panicked or ignored the complaint.

Misjoinder is worth examining in every Schedule A case. Courts have shown increasing willingness to scrutinize the practice of joining unrelated defendants in a single complaint. Where joinder is improper, raising that argument forces the plaintiff to either refile – incurring additional cost and delay – or settle on more favorable terms. It is not always the right move on every timeline, but it should always be evaluated.

Finally: the Etsy platform itself is not the adversary in these cases. The freeze on your shop comes from a court order served on Etsy, not from an Etsy enforcement decision. Etsy is complying with a legal obligation. That means the resolution of the court case is what unlocks the account – Etsy's own dispute process is not the path here.

If a first attempt to contact plaintiff's counsel or a motion to dissolve has already come back without a useful result, a second read of the file can often find the specific pressure point that was missed. That is what the CTA below addresses.

To discuss the specifics of your Schedule A matter – TRO, asset freeze, damages exposure, or settlement – contact us at info@tutamenlaw.com. We review the notice and the complaint first, then tell you what is realistically open.

Frequently asked questions

How long does resolving damages exposure in a sad scheme case usually take on Etsy?

Resolution timelines vary considerably depending on how quickly plaintiff's counsel engages, whether there is a motion to dissolve or modify the TRO, and how close the case is to the preliminary injunction hearing when defense counsel enters. In matters we handle, many Schedule A cases for defendants with documented sourcing positions and a credible innocent-seller argument reach a negotiated resolution within several weeks to a few months of engagement. Unresolved cases where defendants default or do not appear can result in permanent injunctions and default judgments on the full damages range in far shorter timeframes – which is why early engagement is critical.

What are the main risks if I handle damages exposure in a sad scheme case alone?

The primary risks are missing the window to challenge the TRO before the preliminary injunction hearing, failing to preserve and present sourcing documentation in a form that supports the innocent-seller damages argument, and settling on terms that are worse than what counsel could have negotiated. There is also a procedural risk: responses to federal court orders have strict deadlines and formal requirements. A seller who files an inadequate or late response may inadvertently waive defenses that would otherwise have created real settlement leverage. Default judgment – which can be entered when a defendant does not appear – carries the full statutory damages ceiling with no opportunity to negotiate downward.

Do I need a lawyer for damages exposure in a sad scheme case?

In the vast majority of Schedule A matters, yes. The case is in US federal court, the order is a federal court order, and the procedural steps – moving to dissolve or modify a TRO, challenging jurisdiction or joinder, responding to a preliminary injunction motion, drafting a consent judgment – require federal court practice. Beyond the procedural mechanics, experienced counsel brings knowledge of how serial-filer plaintiffs and their counsel operate, which directly affects the settlement calibration. The cost of representation is almost always far lower than the cost of the damages exposure that counsel is working to reduce.

Related areas

• Schedule A / TRO Defense – full practice overview for marketplace sellers named as federal defendants
• Amazon Account Reinstatement – account deactivations, Plans of Action, and appeals across Amazon surfaces

About Tutamen

Tutamen is an independent law firm for online marketplace sellers. We represent Amazon, Walmart, Etsy and eBay sellers in account deactivations, frozen-funds recovery, intellectual-property disputes, arbitration and Notices of Dispute, and US federal Schedule A defense, plus EU marketplace regulation. Our work is attorney-led and confidential, with fees quoted up front. We act for founders, brand owners and in-house teams who need a specialist for a marketplace dispute. Our Schedule A practice covers TRO response, asset-freeze motions, jurisdiction and joinder challenges, and settlement negotiation – with a fixed engagement fee quoted after reviewing the complaint and TRO. To discuss your situation, email info@tutamenlaw.com.

Written by Sofia Marchetti, Partner – Schedule A / Federal Defense.

Page authored by Sofia Marchetti, Partner, Schedule A / Federal Defense, Tutamen.

Disclaimer: This article is general information, not legal advice, and does not create an attorney-client relationship. Marketplace policies and the law change, and every account and case is different. For advice on your situation, contact Tutamen at info@tutamenlaw.com.