Friday, August 2, 2019

Are Rule 11 Sanctions Warranted If Plaintiff Names the Wrong Defendants?

Yes.

RooR International Bv and Sream, Inc (collectively "RooR") have filed dozens (more? - a recent search suggests over 100 such cases) of suits throughout Florida asserting trademark rights for purported counterfeit sales of its water pipes. 

Recently, RooR asserted such claims against Nipa Enterprise, Inc. and and Ashmaul Hosna for such alleged counterfeit sales at their store in 2016.  But Nipa and Hosna did not own the store in 2016.  Indeed, Nipa Enterprise, Inc. was not formed until 2017.  Defendants filed their Rule 11 motion after waiting for the Rule 11 safe harbor period to elapse.

RooR responded by seeking leave to file an Amended Complaint.  That Amended Complaint named different defendants, and no longer named Nipa and Hosna.  The Court then took up Nipa and Hosna's Rule 11 motion.

Nipa and Hosna claim there is no factual basis for the Complaint because they did not own the store when the counterfeit sale happened. (Doc. 34 at 2-3). Rather than deny or disputing this claim, Roor and Sream filed an Amended Complaint identical to the original Complaint, except it replaces Nipa and Hosna with new defendants. (Doc. 38). So Roor and Sream implicitly admit that the new defendants owned the store at the time of the sale—not Nipa and Hosna. On that basis, the Court concludes that the original Complaint was objectively baseless. See Busse v. Lee Cty., Fla., No. 2:07-cv-228-FtM29SPC, 2007 WL 4350863, at *2-3 (M.D. Fla. Dec. 11, 2007) (finding plaintiff’s claim, that defense counsel perpetuated fraud before she was born, objectively baseless)
RooR likely did not help itself by failing to respond to the sanctions motion:

Roor and Sream also should have known that Nipa and Hosna were the wrong parties. See Attwood v. Singletary, 105 F.3d 610, 613 (11th Cir.1997) (per curiam) (“Rule 11 requires [litigants] to make reasonable inquiries into the veracity of information filed before the court[.]”). A simple public record search could have easily fixed the error. Instead, Nipa and Hosna were named defendants for three months. RooR and Sream wasted three months of Nipa’s, Hosna’s, and the Court’s time and resources. And RooR and Sream have failed to respond as to why they did so when given the chance. The Court thus finds sanctions warranted and will award Nipa and Hosna reasonable costs and attorney’s fees. See Donaldson v. Clark, 819 F.2d 1551, 1556 (11th Cir. 1987) (Rule 11 sanctions can be “viewed as a form of cost-shifting, compensating opposing parties injured by the vexatious or frivolous litigation” or “as a form of punishment imposed on those who violate the rule[.]”).
The Court then imposed liability on plaintiffs' counsel to pay defendants' reasonable costs and attorney fees.

Motion for sanctions, granted.
RooR International Bv v. Ullah Business, Inc., Case No. 2:19-cv-222-FtM-38MRM (M.D. Fla. July 31, 2019) (J. Chappell)

Tuesday, January 8, 2019

Do You Need To Threaten Litigation To Trigger Declaratory Judgment Subject Matter Jurisdiction?

No.

Erbaviva, LLC, a California LLC, sent a demand letter to Era Organics, a Florida company.  The letter identified a number of Erbaviva federal trademark registrations, and "request[ed]" Era Organics:

  1. Request the USPTO expressly abandon certain Era Organics trademark registrations;
  2. Permanently refrain from using ERA ORGANICS, or any similar mark, in connection with certain goods;
  3. Provide written assurances Era Organics will comply with these "requests"

The letter then concluded:
Provided we receive Era Organics' full and prompt cooperation, as well as confirmation that the above action has been performed, our client is prepared to give Era Organics a reasonable amount of time to transition to a new company name/trademark and sell through its remaining inventory.
The letter demanded compliance within 11 days.

Instead of changing the name it had been using for at least 4 years, Era Organics filed suit, seeking a declaratory judgment that there was no trademark infringement.  Erbabviva sought dismissal, arguing there was no jurisdiction to hear the dispute, as there was no "actual controversy."  Erbabviva argued its letter did not create any such dispute:
Nowhere in the letter did Defendant threaten litigation or suggest that it intended to take any formal action.  To the contrary, Defendant indicated that it was concerned about confusion in the marketplace and expressed a willingness to work with Plaintiff on resolving the dispute informally and amicably.  Plaintiff never responded to Defendant's letter but instead rushed to Court to file the present action.  In doing so, Plaintiff effectively jumped the gun.
The Court was not persuaded:
Defendant's letter described the likelihood of confusion between its products as "substantial" and "perhaps inevitable," and requested that Plaintiff cancel its federal trademarks and "permanently refrain" from using its own mark, among other things.  Dkt. 1, p. 14.  An actual controversy exists.
Motion To Dismiss for Lack of Jurisdiction, Denied
Era Organics, Inc. v. Erbaviva, LLC, Case No. 8:18-CV-2219-T-30SPF (M.D. Fla. Jan 4, 2019) (J. Moody)

Thursday, October 25, 2018

Are the Pleading Standards for Method Claims More Rigorous in the Context of Rule 11?

No.

Micro Processing Technology, Inc. sent a letter to Plasma-Therm alleging that Plasma-Therm was infringing MPT's patent.  Plasma-Therm filed a declaratory judgment action seeking a declaration that it did not infringe.  Six months into the litigation, MPT served preliminary infringement contentions, which were based "[u]pon the information currently available to MPT and its belief."  MPT twice amended its infringement contentions. 

Plasma-Therm then moved to strike MPT's infringement contentions, arguing MPT lacked diligence in their preparation.  The Court denied the motion to strike, noting that while the contentions were "sparce," they gave notice of MPT's preliminary theories.  The Court also noted that the parties would have an opportunity to serve final contentions later in the litigation.

A month later, MPT filed its counterclaims asserting patent infringement (and other claims).    Plasma-Therm moved to dismiss those counterclaims.  Two weeks later (before MPT responded to the motion to dismiss), Plasma-Therm sought sanctions pursuant to Rule 11 for MPT's failure to conduct a proper pre-suit inquiry before asserting its patent infringement counterclaims.

The next day, the Court construed a number of terms the parties has disputed, adopting Plasma-Therm's constructions.  Shortly thereafter, MPT voluntarily dismissed its counterclaims and the case settled in full, but for resolution of the sanctions motion.

MPT offered four defenses to the sanction motion:

  1. its counterclaims were compulsory, so it had to file them at an early stage of the litigation;
  2. the sanctions motion is better resolved as a motion to dismiss;
  3. the standard for pre-suit investigations is different for method patent claims than product claims; and
  4. its pre-suit investigation was reasonable in light of its "good faith constructions.

As to the counterclaim being compulsory:
the fact that a counterclaim may be compulsory does not excuse a litigant or counsel from compliance with Rule 11.  See e.g. View Eng'g, Inc. [v. Robotic Vision Sys], 208 F.3d 981, 986 (Fed. Cir. 2000) (affirming Rule 11 sanctions on defendant who filed counterclaims of patent infringement without reasonable inquiry following plaintiff's declaratory action seeking to have defendant's patent declared invalid, or in the alternative, a finding of no infringement).
As to the sanctions motion being better resolved as a motion to dismiss:
The Court disagrees.  With respect to patent infringement claims, Rule 11 asks whether there was, at a minimum, a reasonable basis for a finding of infringement.  Thought not the only factor, the content of the pleadings is relevant to that analysis.
As to the legal standard for sanctions in connection with method claims:
None of the cases MPT cites support its theory that a different pre-filing standard exists with respect to patent infringement claims involving a method. Q-Pharma, Inc. [v. Andrew Jergens Co.], 360 F.3d 1295, 1300-01 (Fed. Cir. 2004) (analyzing a patent “directed to a method” and stating that “[i]n the context of patent infringement actions, we have interpreted Rule 11 to require, at a minimum, that an attorney interpret the asserted patent claims and compare the accused device with those claims before filing a claim alleging infringement”); PPS Data, LLC [v. Athenahealth, Inc], 2012 WL 601208, at *1 (describing pre-filing analysis). Other case law on the topic of Rule 11 sanctions does not support MPT’s assertion, either. See, e.g., Judin v. U.S., 110 F.3d 780, 784 (Fed. Cir. 1997) (analyzing whether claimant and attorney adequately compared accused devices with patent claims involving a method). Therefore, the Court finds no basis to adopt MPT’s contention that it did not need to conduct a factual inquiry prior to filing suit.
As to the reasonableness of its pre-suit analysis:
Here, MPT has not shown why, prior to filing suit, MPT believed its claim of infringement was meritorious. MPT has not compared any product, process, or method utilized by Plasma Therm to the patents-in-suit. Nor has MPT even identified any such product, process, or method utilized by Plasma-Therm against which the patents-in-suit could have been compared. See Judin, 110 F.3d at 784 (Viewing an alleged infringing device “may have been sufficient to put Judin on inquiry about whether the Government was using a device that infringed his patent. But Rule 11 requires more. It requires that the inquiry be undertaken before the suit is filed, not after.”). 
The only explanation MPT gives as to why it believed it had a reasonable chance of proving infringement is provided in a footnote, in which MPT states that “if Plasma-Therm practiced the disputed claims in the way Plasma-Therm implies it did in its claims constructions it would infringe the claims as construed by MPT.” Doc. 111 at p. 2, n. 3. But Plasma-Therm’s claim construction brief does not explain its own products, processes, or methods. Rather, PlasmaTherm’s claim construction brief describes only the patents-in-suit, including the specification and prosecution, to explain why the disputed claim terms should be construed as Plasma-Therm suggests. To the extent MPT draws inferences about Plasma-Therm’s product, processes, or method from Plasma-Therm’s advocacy of certain claim constructions, this is not explained. Nor would such inferences have necessarily been reasonable and sufficient for MPT to meet its burden under Rule 11 given the Court’s rejection of MPT’s claim constructions. See Source Vagabond Sys. Ltd. [v. Hydrapack, Inc.], 753 F.3d 1291, 1302 (Fed. Cir. 2014).
Summarizing its analysis, the Court noted that "neither MPT nor its counsel even suggest that they attempted to apply the claims of the patents-in-suit to any accused device, method, process, or product of Plasma-Therm.  The failure of MPT and its attorneys to make a reasonable inquiry before filing the frivolous infringement counterclaims warrants Rule 11 sanctions."

Motion for sanctions granted.
Plasma-Therm, LLC v. Micro Processing Technology, Inc., Case No. 8:15-CV-2785-T-36TBM (M.D. Fla. Oct. 23, 2018) (J. Honeywell)

Wednesday, October 3, 2018

Can The Manager of a Florida LLC Represent the Corporation in Litigation?

If she or he is not a lawyer, no.

David Boggs, LLC and Mac Mar, LLC sued Matthew Soltis and his company My Affordable Roof, LLC for trademark infringement concerning the mark "MY AFFORDABLE ROOF."  Soltis appears to have opted to defend himself.  He has submitted a number of filings to the Court captioned as requests for extension of time, motions to dismiss for lack of subject matter jurisdiction, and answers.  He has submitted these filings both on behalf of himself, and on behalf of his corporation.

On plaintiffs' motion, the Court struck the first such filing on behalf of the corporation:
Soltis is not an attorney so cannot represent this entity under Local Rule 2.03(e). (Doc. 16, pp. 1–3.) See Local Rule 2.03(e) (“A corporation may appear and be heard only through counsel admitted to practice in this Court pursuant to Rule 2.01 or Rule 2.02.”); see also Energy Lighting Mgmt., LLC v. Kinder, 363 F. Supp. 2d 1331, 1332 (M.D. Fla. 2005) (applying Local Rule 2.03(e) to limited liability companies).
Undeterred, Soltis tried again, moving for an extension of time on behalf of himself and his corporation to respond to the complaint.  The Court again reminded Soltis that a corporation must be represented by counsel:
Defendant Soltis has again filed a Motion on behalf of My Affordable Roof, LLC in violation of the local rules. The Motion filed on behalf of Defendant, My Affordable Roof, LLC is unauthorized. 
Soltis then filed a motion to dismiss the complaint as to him, and tried filing an answer on behalf of the Corporation.  The Court struck the corporation's answer, and denied Soltis' motion:
On review, the Court finds the Motion is due to be denied. First, the Motion is untimely. Indeed, Soltis’ approach to this case reveals a pattern of disregarding court orders, despite repeated extensions and opportunities for compliance. This latest Motion appears to be another delay tactic, as the Court flatly denied Soltis leave to file it. (See Doc. 22.) Moreover, Soltis’ argument that the Court lacks subject matter jurisdiction here is meritless. Plaintiffs’ Complaint alleges violations of the Lanham Act based, in part, on Defendants’ engagement in interstate commerce. (E.g., Doc. 1, ¶ 20.) Accepting these allegations as true, subject matter jurisdiction exists here. See Stalley ex rel. U.S. v. Orlando Reg’l Healthcare Sys. Inc., 524 F.3d 1229, 1232–33 (11th Cir. 2008) (announcing standard of review for facial subject matter jurisdiction attacks where the defendant does not use material extrinsic to the pleadings). 
Motion to dismiss, granted.  Motion to strike corporation's answer, granted.  Amended motion for default as to corporation, granted as well.

[Practice pointer -- a corporation may not represent itself in the Middle District of Florida; it must engage counsel.]

David Boggs, LLC v. Soltis, Case No. 6:18-CV-687-ORL-37GJK (M.D. Fla. Oct. 1, 2018) (J. Dalton, Jr.)

Thursday, September 6, 2018

Does The Labor Day Holiday's Mattress Sale Weekend Warrant a Temporary Restraining Order?

No.

The owner of the TEMPUR-PEDIC bedding brand ("Plaintiff") has sued a number of defendants, including a former retailer as well as the owner of the THERAPEDIC bedding brand.  Through that lawsuit, Plaintiff seeks to enjoin sales of the THERAPEDIC bedding.

To that end, on August 28, 2018, the Tuesday before the labor day holiday, Plaintiff filed suit.   Along with its complaint, Plaintiff also filed a motion for a temporary restraining order, as well as a motion for a preliminary injunction.  The next day, the Court denied the motion for TRO for failure to comply with Fed. R. Civ. P. 65(b)(1)(B)'s obligation that the filing lawyer certify what efforts she has made to give notice to the defending party, and why notice should not be required.  Notably, the Court also referred the motion for preliminary injunction the magistrate judge to conduct an evidentiary hearing and issue a report and recommendation.

After its motion was denied, Plaintiff's general counsel emailed the retailer defendant's general counsel demanding defendant cease sales, and provided a copy of the motion for TRO as well as the Court's order denying it.  Plaintiff's letter gave defendant one day to comply.  Defendant did not respond.

Plaintiff next renewed its motion for TRO on the evening of August 30, 2018 (the Thursday before the labor day holiday).  Plaintiff included a copy of its letter to the defendant in an attempt to satisfy Fed. R. Civ. P. 65(b)(1)(B).  The next day, Friday, around 11:50am Defendant's counsel contacted the Court and indicated that it wanted to oppose Plaintiff's motion for TRO.  The Court gave defendant until 3pm that day to file its response, which defendant did.

Plaintiff's argument for a TRO was based, in part, on the labor day sales weekend being "one of the bedding industry's biggest sales weekends."  Permitting defendant to sell the allegedly infringing products through this weekend would result in "significant irreparable harm to [Plaintiff's] brand and goodwill."  In response, defendant explained that its limited sales in a single test market, as well as its long standing trademark rights -- predating Plaintiff's trademark rights -- cautioned against the extraordinary remedy of an ex parte temporary restraining order.   The Court agreed with defendant:
The Court is mindful that “[a]n ex parte temporary restraining order is an extreme remedy to be used only with the utmost caution.” Levine v. Comcoa Ltd., 70 F.3d 1191, 1194 (11th Cir. 1995). Given the contested nature of the allegations underpinning Plaintiffs’ argument for a temporary restraining order, as well as Mattress Firm’s request that it be given an opportunity to respond fully before any injunctive relief is granted, the Court denies the Renewed Motion for Temporary Restraining Order. The Court finds that Plaintiffs have not carried their burden for the issuance of a temporary restraining order pursuant to Federal Rule of Civil Procedure 65 and Local Rule 4.05.
While absent from the Court's order, defendant also explained another interesting angle in its responsive brief.  Apparently, the parties have been engaged in separate litigations in Texas state and federal court, where the Texas state litigation is due to begin trial later this month.  According to defendant, Plaintiff has filed a number of motions seeking preliminary injunctions against defendant.  And defendant notes that the Texas state court denied a request for a temporary restraining order against defendant more than a year ago. 

Renewed motion for temporary restraining order, denied.
Tempur-Pedic North America, LLC v. Mattress Firm, Inc., Case No. 8:18-CV-2147-VMC-SPF (M.D. Fla. Aug. 31, 2018) (J. Covington)

Monday, August 27, 2018

Are Fees Recoverable Automatically When You Make a "Good" Offer of Judgement?

Nope.  The party seeking fees pursuant to a rejected Rule 68 Offer of Judgment still has the burden of showing a proper offer was made, was served, and was not accepted.

After what appears to have been 3+ years of contentious copyright infringement litigation, Plaintiffs were awarded $1,015.20 in damages against Defendants.  Plaintiffs owned copyrights in certain artwork, and Defendants had used this artwork in connection with certain "paint parties."  After this damage award, the parties engaged in various motion practice seeking sanctions and costs against each other.  The Court summarized the case's posture as follows:

Although this case presented fairly straightforward issues of copyright infringement, the case proceeded in anything but a straightforward manner. The nearly 400 docket entries in this case contain a plethora of motions for extensions of time and modification of deadlines, and other filings before the Court that can be best described as unprofessional and unnecessary squabbling between the parties. The tone of the parties’ papers was so poor, that early in the litigation the Magistrate Judge admonished the parties to “confine their presentations to facts and law that are relevant to the Court’s determination of the issues presented in the parties’ papers. Counsel shall refrain from caustic comments and characterizations of the motive of any party or counsel.” (Doc. 90, pp. 2–3). Unfortunately, this advice went unheeded, and the case dragged on for another three years.
After deciding neither sides' behavior rose to the level warranting sanctions, the Court addressed Defendants' argument that it was entitled to recover its fees and costs because Defendants had allegedly served an Offer of Judgment pursuant to Fed. R. Civ. P. 68 to settle the case for $2,500 -- more than Plaintiffs recovered at trial.  Problem is, Defendants did not  attach a copy of the offer of judgment that was purportedly served.

Instead, Defendants referenced an "Exhibit 1" in their briefing.  But Defendants did not attach an exhibit to the brief.  Instead, Defendants filed a brief that exceeded the page limits set by local rules and was admonished by the Court for doing so.  (The Court struck a few portions of the brief and refused to consider them in order to bring the brief's page count back into the 25-page limit set by the rules.)

The Court noted that it was not responsible for hunting for the evidence a moving party seeks to use to support its position:
The burden does not fall on this Court to ferret through the ballooned docket in this case to find evidence supporting Bloomington’s claims for fees and costs.  By failing to attach a Rule 68 offer to its Motion for fees, or to otherwise direct the Court where to find the document in the record, Bloomington has not carried its burden of establishing it is entitled to fees under Rule 68. 
Notwithstanding this admonition, the Court did search through the various docket entries and find something labeled "offer of judgment."  But there was not sufficient evidence showing such a document was served in accordance with the rules.   As such, the request for fees pursuant to Rule 68 were denied.

The Court then went through an analysis of Plaintiffs' request for recoverable costs, and awarded $4,482.95 as recoverable costs.

Motions for sanctions, denied.  Motion for fees, denied.  Motion for taxation of costs, granted.

Duncanson v Bloomington, Case No. 6:14-cv-704-PGB-KRS (M.D. Fla. Aug. 23, 2018) (J. Byron)