Bullets2bandages, LLC v. Caliber Corporation

[5] 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA [8] BULLETS2BANDAGES, LLC, a Case No. 3:18-cv-00669-GPC-KSC 9 California limited liability company, 10 Plaintiff, ORDER DENYING 2 MONKEY TRADING LLC’S MOTION TO 11 v. VOLUNTARILY DISMISS THIRD PARTY COUNTERCLAIMS 12 CALIBER CORPORATION, an Illinois AGAINST CALIBER corporation, CORPORATION [13] Defendant. [Dkt. No. 79.] [14] CALIBER CORPORATION, an Illinois 15 Corporation, 16 Counterclaim-Plaintiff, 17 v. 18 BULLETS2BANDAGES, LLC, a California limited liability company, [19] Counterclaim-Defendant, [20] CALIBER CORPORATION, an Illinois 21 Corporation, 22 Third-Party Plaintiff, 23 v. [24] LUCKY SHOT USA LLC, a Florida 25 Limited Liability Company; and 2 MONKEY TRADING, LLC, a Florida 26 Limited Liability Company, 27 Third-Party Defendants, LUCKY SHOT USA LLC, a Florida 1 Limited Liability Company; and 2 MONKEY TRADING LLC, a Florida 2 Limited Liability Company, 3 Third- Party CounterclaimPlaintiffs, [4] v. [5] CALIBER CORPORATION, an Illinois 6 Corporation, 7 Third Party CounterclaimDefendant. [9] 10 Before the Court is Third Party Defendant /Third Party Counterclaim Plaintiff 2 11 Monkey Trading, LLC (“2 Monkey”)’s motion to voluntarily dismiss its 12 Counterclaims, (Dkt. No. 42, Counterclaims ¶¶ 22-66), against Caliber Corporation. 13 (Dkt. No. 79.) Third Party Plaintiff/Third Party Counterclaim Defendant Caliber filed 14 an opposition. (Dkt. No. 88.) No reply has been filed. Based on the reasoning below, 15 the Court DENIES without prejudice 2 Monkey’s motion to voluntarily dismiss its 16 Third Party Counterclaims. 17 Background1 18 The facts of the case have been recited at length in the Court’s prior order and 19 will not be repeated here. (See Dkt. No. 95, Order Granting Motion for Leave to File 20 Amended Counterclaims and Third Party Claims.) The Court presents an abbreviated 21 version of the facts. 22 Plaintiff Bullets2Bandages, LLC (“B2B”) and Defendant Caliber Corporation 23 (“Caliber”) are both in the business of selling bullet-shaped bottle openers. In a prior 24 case, B2B and Caliber entered into a Settlement Agreement on June 9, 2014, to be 25 effective April 7, 2014, where B2B assigned to Caliber all rights to the CALIBER [26] 27 1 The facts are taken from the Court’s order granting Caliber’s motion for leave to file Amended Counterclaims and Third Party claims. (Dkt. No. 95.) 1 Mark, U.S. Trademark Registration No. 4,364,453, agreed to withdraw its opposition 2 to Caliber’s registration of the Bullet Trade Dress2 and agreed not to use the phrase 3 “the original”3 in connection with the sale of bullet-shaped bottle openers. (Dkt. No. 4 96, Counterclaim ¶ 23.) In exchange, Caliber agreed to grant B2B a worldwide, 5 nonexclusive license to the Bullet Trade Dress and to “B2B’s then-current use of the 6 word ‘Caliber’”. (Id. ¶ 23; Dkt. No. 1, Compl. ¶ 9.) 7 In accordance with the Settlement Agreement, B2B sold its products to 2 8 Monkey Trading, LLC (“2 Monkey”) (a/k/a Lucky Shot), a wholesaler. 2 Monkey sells 9 B2B’s products through online retailers, Amazon and Etsy. B2B learned that someone 10 had complained that 2 Monkey’s products were infringing, and as a result, Amazon 11 and Etsy removed 2 Monkey’s listings from their websites, barring it from engaging in 12 any sales of B2B’s products. It was later discovered that Caliber complained to 13 Amazon and Etsy. The underlying Complaint alleges breach of the Settlement 14 Agreement and related claims. 15 Meanwhile, Caliber’s Counterclaim and Third-Party Complaint alleges that 16 following the execution of the Settlement Agreement, Caliber manufactured large 17 caliber bullet-shaped bottle openers for third parties including, 2 Monkey. (Dkt. No. 18 41, Counterclaim ¶ 36.) On or after April 7, 2017, Caliber told 2 Monkey that it could 19 offer a nonexclusive license to its Bullet Trade Dress. (Id. at ¶ 37.) 2 Monkey then 20 ceased purchasing product from Caliber and expressed an interest in obtaining a license 21 for sale of products bearing the Bullet Trade Dress. (Id. ¶ 38.) During the remainder 22 of 2017, 2 Monkey continued to independently purchase and/or manufacture bullet23 shaped bottle openers. (Id. ¶ 39.) Around April 2017, 2 Monkey contracted with Triton 24 Welding & Machine Shop located in Cocoa, Florida to cut openings in .50 caliber shell [25] 26 2 On December 23, 2013, B2B filed an opposition to Caliber’s application for registration of the Bullet Trade Dress with the USPTO claiming that the mark constituted matter that is functional. (Dkt. No. 41, Counterclaim ¶ 21.) 27 3 Caiber also owns trademark Registration No. 4,930,487 for the mark, ORIGINAL .50 CALIBER BOTTLE OPENER. (Dkt. No. 41, Counterclaim ¶ 19.) 1 casings and contracted with Orlando Contract Packaging located in Altamonte Springs, 2 Florida to assemble .50 caliber bottle openers. (Id. ¶ 40.) 2 Monkey then de-burred 3 and polished the bottle openers, itself, and sold them to others through Lucky Shot. 4 (Id.) 2 Monkey knew it needed a license to the Bullet Trade Dress and engaged in 5 negotiations with Caliber throughout 2017 and early 2018 regarding a license for the 6 sale of large caliber bottle openers. (Id. ¶ 42.) On January 25, 2018, after making a 7 requested change by 2 Monkey to the agreement, Caliber believed they had an 8 agreement. (Id. ¶ 43.) But 2 Monkey delayed execution of the agreement. (Id. ¶ 44.) 9 On February 23, 2018, 2 Monkey told Caliber that it would purchase products from 10 B2B instead of Caliber. (Id. 45.) Because Caliber and 2 Monkey did not enter into a 11 license agreement, 2 Monkey’s prior sales of bullet-shaped bottle openers since April 12 2017 were unlicensed, unauthorized and counterfeit. (Id. ¶ 46.) 13 Around February 23, 2018, 2 Monkey entered into a Manufacturing Agreement 14 with B2B without Caliber’s knowledge, and on that day, 2 Monkey placed its first order 15 of 5,000 .50 caliber bullet-shaped bottle openers and other bullet-shaped bottle openers. 16 (Id. ¶ 47.) As a result, Caliber notified Amazon and Etsy on February 23, 2018 that 17 Lucky Shot’s then-existing product was infringing its Bullet Trade Dress. (Id. ¶ 48.) 18 B2B did not obtain Caliber’s consent to transfer rights to the Bullet Trade Dress or 19 CALIBER mark to 2 Monkey or Lucky Shot. (Id. ¶ 49.) Lucky Shot continues to list 20 bullet-shaped bottle openers on its own website, Amazon.com and Etsy.com without a 21 license from Caliber. (Id. ¶ 50.) Lucky Shot also uses the phrase “the original” without 22 a license from Caliber. (Id. ¶ 51.) B2B continues to use the phrase “the original” in 23 connection with the sale of bullet-shaped bottle openers without a license from Caliber. 24 (Id. ¶ 52.) Amazon and Etsy removed specific listings of Lucky Shot to comply with 25 their policies on sale of infringing and/or counterfeit products. (Id. ¶ 53.) On March 26 1, 2018, B2B contacted Caliber demanding that the take-down notices be withdrawn 27 explaining that all 2 Monkey/Lucky Shot products were being manufactured by B2B 1 as of Monday, February 26, 2018. (Id. ¶ 56.) In response, Caliber sought a copy of the 2 Manufacturing Agreement that was heavily redacted but confirmed that B2B and 2 3 Monkey/Lucky Shot entered into a sublicense agreement. (Id. ¶ 60.) Moreover, 4 invoices related to the production of bottle openers for 2 Monkey were produced 5 indicating that B2B subcontracted with Triton Welding & Machine Shop, Inc. and 6 Orlando Contract Packaging, the same companies 2 Monkey hired directly to 7 manufacture bottle openers from April 2017 to February 2018. (Id. ¶¶ 61-62.) Caliber 8 also requested the pricing information in the Manufacturing Agreement and purchase 9 documents that verify that B2B is the manufacturer but B2B and 2 Monkey refused. 10 (Id. ¶¶ 65, 66.) Therefore, Caliber is unable to determine whether the Lucky Shot 11 bullet-shaped bottle openers on Amazon and Etsy are counterfeit, non-infringing or 12 produced under the settlement agreement with B2B. (Id. ¶ 67.) 13 On January 10, 2019, Caliber filed the Amended Answer, Counterclaims and 14 Third-Party Claims. (Dkt. No. 41.) On January 24, 2019, Third Party Defendants filed 15 an Answer to the Third-Party Complaint and Counterclaim as well as their Third Party 16 Counterclaims against Caliber seeking a declaration that trademark registration no. 17 4,630,557 (Bullet Trade Dress) is invalid, cancellation of federal trademark registration 18 No. 4,630,557 (Bullet Trade Dress), cancellation of federal trademark registration No. 19 4,364,453 (CALIBER mark), and cancellation of federal trademark registration No. 20 4,930,487 (ORIGINAL mark). (Dkt. No. 42 at 15-22.) 21 The deadline for the completion of fact discovery in this case was May 10, 2019 22 and expert discovery deadline was September 13, 2019. (Dkt. No. 35 at 2-3.) 23 At the end of discovery, on September 12, 2019, B2B and 2 Monkey entered 24 into an Asset Purchase Agreement (“APA”) where B2B sold all of its business assets 25 related to bullet bottle openers, including the subject matter of the Settlement 26 Agreement, which is at issue in this case, to 2 Monkey. (Dkt. No. 64-10,Ex. 6 to Ex. 27 A.) The APA specifically provides, [1] a. B2B hereby assigns, transfers, grants, conveys, and delivers to 2 [2] Monkey, all of its business assets related to the subject matter of the 3 Settlement Agreement free and clear of all debts, security interest, liens, charges, or other encumbrances. For example, this includes [4] B2B’s bullet bottle opener manufacturing business. 5 b. The Parties hereby make this assignment retroactively effective as of April 7, 2017. [6] (Id., APA ¶ 1.) [7] Due to the APA, on September 13, 2019, 2 Monkey filed a motion to substitute [8] it in place of B2B, which was denied on November 1, 2019. (Dkt. Nos. 49, 65.) On [9] October 25, 2019, Caliber sought to re-open discovery concerning the execution and [10] content of the APA to determine its impact on the instant litigation. (Dkt. No. 59.) In [11] its motion, Caliber stated that once discovery is complete, the parties will need to brief [12] and argue pre-trial motions related to the APA. (Dkt. No. 57-1 at 12.) On December [13] 9, 2019, the Magistrate Judge granted Caliber’s motion to reopen discovery solely into [14] the APA with discovery to be completed by January 24, 2020. (Dkt. No. 90 at 6.) The [15] Magistrate Judge noted that because the APA was executed weeks after the close of [16] fact discovery, and the APA creates new legal relationships between the parties with [17] respect with the Bullet Trade Dress creating new causes of action, the Magistrate Judge [18] found good cause to reopen discovery. (Id. at 6.) [19] According to Caliber, the APA complicates the issues in the case because “(1) [20] it purports to change the relationship of the parties and affect nearly every aspect of [21] this case; (2) it creates new claims of trademark infringement and unfair competition [22] against B2B by retroactively removing B2B’s trademark license and granting it to 2 [23] Monkey; (3) it creates new breach of contract claims against Third-Party Defendants [24] by allegedly transferring the license to 2 Monkey; and (4) it creates new interference [25] with prospective economic advantage claims against Third-Party Defendants.” (Dkt. [26] No. 64-1 at 4.) [27] 1 On December 18, 2019, the Court granted Caliber’s motion for leave to file 2 Amended Counterclaims and Third-Party Claims. (Dkt. No. 95.) On December 20, 3 2019, Caliber filed a Second Amended Answer to Complaint, Counterclaims and 4 Third-Party Claims. (Dkt. No. 96.) 2 Monkey and Lucky Shot filed an Answer to 5 Second Amended Third Party Complaint and Counterclaim. (Dkt. No. 97.) 6 The Court noted that 2 Monkey and Lucky Shot did not re-allege their Third7 Party Counterclaims in their Answer. It was not clear whether 2 Monkey and Lucky 8 Shot had dropped the Third-Party Counterclaims against Caliber. Therefore, the Court 9 directed them to either withdraw their motion to voluntarily dismiss its Third-Party 10 Counterclaims as moot or explain with legal authority whether the Third-Party 11 Counterclaims are still operative by January 15, 2020. In response, on January 15, 12 2020, 2 Monkey and Lucky Shot filed a motion for leave to file Amended Answer to 13 Second Amended Third Party Complaint and Counterclaim to add the mistakenly 14 omitted Third Party Counterclaims against Caliber. (Dkt. No. 100.) However, because 15 2 Monkey and Lucky Shot failed to obtain a motion hearing date from chambers which 16 is in violation of the Local Civil Rules, the Court rejected the document on discrepancy 17 on January 16, 2020. (Dkt. No. 101.) To date, 2 Monkey and Lucky Shot have not 18 sought to re-file their motion. 19 Notwithstanding 2 Monkey and Lucky Shot’s failure to comply with the Court’s 20 direction, a counterclaim need not be reasserted when answering the amended 21 complaint. See AnTerra Grp. Inc. v. KiVAR Chem. Techs., Case No. SACV 13-734 22 JVS(ANx), 2014 WL 12589631 , at *3 (C.D. Cal. May 23, 2014) (counterclaims were 23 not abandoned by failing to reassert them in the answer to the amended complaint). 24 “Any amendments to a complaint, and in turn an answer, do not require a counterclaim 25 to be reasserted if there are no revisions to it.” Ada Cnty. Highway Dist. v. Rhythm 26 Eng’g, LLC, Case No. 15cv584-CWD, 2017 WL 1502791 , at *7 (D. Idaho Apr. 25, 27 2017) (citing AnTerra Grp. Inc., 2014 WL 12589631 , at *3); Williams & Cochrane, 1 LLP v. Quechan Tribe of the Fort Yuma Indian Reservation, Case No. 17cv14362 GPC(MDD), 2018 WL 3970094 , at * (S.D. Cal. Aug. 20, 2018) (“A plaintiff’s filing 3 of an amended complaint does not moot a counterclaim alleged within an answer to the 4 original complaint.”). Because the Third Party Counterclaims are still operative, the 5 Court considers 2 Monkey’s motion to voluntary dismiss counterclaims challenging 6 the validity of the trademarks. (Dkt. No. 79.) Caliber filed an opposition. (Dkt. No. 7 88.) 2 Monkey did not file a reply. 8 Discussion 9 2 Monkey argues that it seeks to dismiss the Third Party Counterclaims against 10 Caliber which include seeking cancellation of Caliber’s registered bullet trade dress, 11 U.S. Registration No. 4,630,557 . Because it recently acquired a license to use the 12 trade dress as part of the APA which requires that 2 Monkey not seek to cancel the 13 trade dress registration, 2 Monkey seeks dismissal in order to prevent violation of the 14 licensing agreement. 2 Monkey contends that Caliber will not be prejudiced or 15 deprived of any legal claim through the dismissal. 16 Caliber opposes arguing it would be extremely prejudicial to allow 2 Monkey 17 to dismiss its validity challenges yet continue to assert them through its alter ego 18 Lucky Shot. Caliber explains that 2 Monkey and Lucky Shot are commonly owned 19 by Doug and Lynne Ingalls and share the same address in Florida. (Dkt. No. Exs. 1, 20 2.) In their own pleadings, 2 Monkey and Lucky Shot admitted to the allegations that 21 “Third Party Defendant Lucky Shot is a Florida limited liability company with its 22 principal place of business in Orlando, Florida, and an alter ego of 2 Monkey.” (Dkt. 23 No. 41 at 8; Dkt. No. 42 at 2.) To avoid prejudice, Caliber asks that the Court either 24 deny 2 Monkey’s motion or grant it on the condition that the same claims are dropped 25 for Lucky Shot. 2 Monkey did not respond to this suggestion in a reply. 26 Rule 41(a)(2) provides that an action may be dismissed at the plaintiff's request 27 by court order “on terms that the court considers proper.” Fed. R. Civ. P. 41(a)(2). 1 “This rule applies to dismissal of any counterclaim, crossclaim, or third-party claim.” 2 Fed. R. Civ. P. 41(c). The decision whether to grant or deny a request pursuant to Rule 3 41(a)(2) is within the sound discretion of the trial court and is reviewed only for abuse 4 of discretion. Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980). 5 Dismissal pursuant to Rule 41(a)(2) should be granted “unless a defendant can show 6 that it will suffer some plain legal prejudice as a result.” Smith v. Lenches, 263 F.3d 7 972, 975 (9th Cir. 2001) (citing Waller v. Fin. Corp. of Am., 828 F.2d 579 , 583 (9th 8 Cir. 1987)). Legal prejudice means “prejudice to some legal interest, some legal claim, 9 [or] some legal argument.” Westlands Water Dist. v. United States, 100 F.3d 94 , 97 10 (9th Cir. 1996). “Plain legal prejudice does not result merely because the defendant 11 will be inconvenienced by having to defend in another forum or where a plaintiff would 12 gain a tactical advantage by that dismissal.” Smith, 263 F.3d at 976 (“need to defend 13 against state law claims in state court is not ‘plain legal prejudice’ arising from 14 voluntary dismissal of the federal claims in the district court.”). “Plain legal prejudice 15 may be shown where actual legal rights are threatened or where monetary or other 16 burdens appear to be extreme or unreasonable.” United States v. Berg, 190 F.R.D. 539 , 17 543 (E.D. Cal. 1999). In other words, as along as the “defendant will not be prejudiced” 18 or “unfairly affected by dismissal” a plaintiff may be permitted to dismiss an action. 19 Stevedoring Servs. of America v. Armilla Int’l B.V., 889 F.2d 919 , 921 (9th Cir. 1989); 20 McCants v. Ford Motor Co., Inc., 781 F.2d 855, 857 (11th Cir. 1986) (“Rather, the 21 district court must exercise its broad equitable discretion under Rule 41(a)(2) to weigh 22 the relevant equities and do justice between the parties in each case, imposing such 23 costs and attaching such conditions to the dismissal as are deemed appropriate.”). 24 Here, 2 Monkey seeks dismissal of the trademark validity counterclaims it filed 25 against Caliber in order to avoid violating the terms of the Settlement Agreement as 26 provided for in the APA. Yet, in the meantime, discovery is being conducted 27 concerning the facts surrounding the execution of the APA and its impact on this 1 || litigation and the facts are still unfolding. Moreover, dispositive motions concerning 2 ||claims related to the APA or its validity may also be filed. Granting dismissal of 2 3 || Monkey’s claims at this time is premature. 4 Moreover, the Court has concerns that Lucky Shot, a company with the same 5 || ownership as 2 Monkey, may continue to proceed to challenge the validity of the trade 6 dress. While 2 Monkey seeks to avoid a violation of the purported license to the Bullet 7 ||trade dress, it also seeks to challenge the trade dress indirectly through Lucky Shot. 8 || This raises concerns of unfair prejudice to Caliber. After considering the equities and 9 || possible unfair prejudice to Caliber, at this time, the Court DENIES 2 Monkey’s motion 10 voluntarily dismiss its Third-Party Counterclaims against Caliber. 11 Conclusion 12 Based on the above, the Court DENIES without prejudice 2 Monkey’s motion 13 ||for voluntary dismissal of Third-Party Counterclaims asserted against Caliber. The 14 hearing set for January 24, 2020 shall be vacated. 15 IT IS SO ORDERED. [16] Dated: January 22, 2020 7 sale As ( 18 Hon. Gonzalo P. Curiel 19 United States District Judge [27] gg Case No. 3:18-cv-00669-GPC-KSC