Ga. Pac. Consumer Prods., LP v. Von Drehle Corp.

• Decision Date: 14 March 2013
• Docket Number: No. 12–1444.,12–1444.
• Citation: 710 F.3d 527
• Parties: GEORGIA PACIFIC CONSUMER PRODUCTS, LP, Plaintiff–Appellant, and Georgia–Pacific Corporation, Plaintiff, v. VON DREHLE CORPORATION, a North Carolina corporation, Defendant–Appellee, and Carolina Janitorial & Maintenance Supply, a North Carolina corporation, Defendant, Myers Supply, Incorporated, Intervenor/Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

710 F.3d 527

GEORGIA PACIFIC CONSUMER PRODUCTS, LP, Plaintiff–Appellant,andGeorgia–Pacific Corporation, Plaintiff,

v. VON DREHLE CORPORATION, a North Carolina corporation, Defendant–Appellee,andCarolina Janitorial & Maintenance Supply, a North Carolina corporation, Defendant,Myers Supply, Incorporated, Intervenor/Defendant.

No. 12–1444.

United States Court of Appeals, Fourth Circuit.

Argued: Feb. 1, 2013.

Decided: March 14, 2013.

ARGUED:Miguel A. Estrada, Gibson, Dunn & Crutcher, LLP, Washington, D.C., for Appellant. Michael Paul Thomas, Patrick Harper & Dixon, LLP, Hickory, North Carolina, for Appellee. ON BRIEF:Stephen P. Demm, John Gary Maynard, III, George P. Sibley, III, Hunton & Williams LLP, Richmond, Virginia; Jonathan C. Bond, Gibson, Dunn & Crutcher, LLP, Washington, D.C.; W. Kyle Carpenter, Woolf, McClane, Bright, Allen & Carpenter, Knoxville, Tennessee, for Appellant. Susan W. Matthews, Patrick Harper & Dixon, LLP, Hickory, North Carolina; Albert P. Allan, Allan IP Litigation, Charlotte, North Carolina; Stephen L. Curry, Little Rock, Arkansas, for Appellee.

Before GREGORY and KEENAN, Circuit Judges, and ROBERT E. PAYNE, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.

Vacated and remanded by published opinion. Judge KEENAN wrote the opinion, in which Judge GREGORY and Senior Judge PAYNE joined.

OPINION

BARBARA MILANO KEENAN, Circuit Judge:

In our previous consideration of this trademark infringement dispute between plaintiff Georgia–Pacific Consumer Products, LP (Georgia–Pacific) and von Drehle Corporation (von Drehle), we vacated the district court's award of summary judgment in von Drehle's favor, and remanded the case for a jury determination whether von Drehle was liable for contributory trademark infringement. Georgia Pacific Consumer Prods., LP v. Von Drehle Corp., 618 F.3d 441 (4th Cir.2010). More than three months after we issued that decision, von Drehle sought for the first time to amend its answer to include the affirmative defenses of claim preclusion and issue preclusion (the preclusion defenses). These defenses were based on the purportedly preclusive effect of a judgment in favor of one of von Drehle's distributors, which was entered by a federal district court in Arkansas a few weeks before the district court's summary judgment determination that we vacated in the earlier appeal.

The district court initially denied von Drehle's request to amend its pleadings to assert the preclusion defenses, finding that the request was untimely and was prejudicial to Georgia–Pacific. The matter proceeded to a jury trial, resulting in a verdict in Georgia–Pacific's favor. Thereafter, the district court issued an order vacating the jury verdict and awarding judgment in von Drehle's favor, relying on the preclusion defenses arising from the Arkansas case that the district court earlier had rejected. Georgia–Pacific Consumer Prods. LP v. Von Drehle Corp., 856 F.Supp.2d 750 (E.D.N.C.2012). Georgia–Pacific appeals from the district court's judgment in favor of von Drehle.

Upon our review, we hold that the district court erred in vacating the jury verdict and in awarding judgment in von Drehle's favor. We reach this decision because: (1) von Drehle waived the preclusion defenses by failing to assert them in a timely manner; and (2) the district court erred in alternatively considering the preclusion defenses sua sponte. Accordingly, we vacate the district court's award of judgment in von Drehle's favor, and we remand the case to the district court with instructions to reinstate the jury's verdict in favor of Georgia–Pacific.

I.

A.

The facts underlying this dispute are discussed in detail in our previous adjudication of this case. See618 F.3d at 444–48. Georgia–Pacific is a manufacturer of numerous commercial products, including paper towels and dispensers designed for use in the home and in business retail and “hospitality” settings. In the early 2000s, Georgia–Pacific manufactured and began marketing a “touchless” paper towel dispenser (the GP dispenser) under the “enMotion” product line. The GP dispenser was different in size and dimensions from competing dispensers, and Georgia–Pacific developed high-quality paper towels with a fabric-like feel (the GP paper towels), which were designed specifically for use in the GP dispensers. The leases for the dispensers between Georgia–Pacific and its distributors, and the subleases that the distributors were required to enter into with “end-user” customers such as hotels and restaurants, both stipulated that only the GP paper towels were to be used in the GP dispensers. Id. at 444–47.

Soon after the GP dispensers entered the marketplace, von Drehle, a smaller competitor of Georgia–Pacific, developed a line of paper towels (the von Drehle paper towels) that were designed for use in the GP dispensers. The von Drehle paper towels were inferior in quality to the GP paper towels, but von Drehle and its distributors marketed the von Drehle paper towels as a cheaper alternative for use in the GP dispensers, a practice known in the industry as “stuffing.” Id. at 447–48.

In July 2005, Georgia–Pacific filed a complaint against von Drehle in the United States District Court for the Eastern District of North Carolina, alleging, among other things, contributory trademark infringement in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114(1).¹ During the pendency of this litigation with von Drehle, Georgia–Pacific filed separate complaints in several other federal district courts against various distributors of von Drehle's paper towels, including: (1) a complaint in the Western District of Arkansas (the Arkansas court) filed in September 2008 against Myers Supply, Inc. (the Myers case); (2) a complaintin the Northern District of Ohio filed in May 2009 against Four–U–Packaging, Inc. (the Four–U case); and (3) a complaint, also filed in May 2009, in the Southern District of Ohio against Superior Janitor Supply, Inc. (the Superior case). In these complaints, Georgia–Pacific raised, among other claims, a claim for contributory trademark infringement based on these distributors' acts of marketing and selling the von Drehle paper towels for use in the GP dispensers.

In March 2008, the district court in the present case denied Georgia–Pacific's and von Drehle's cross-motions for summary judgment. In April 2009, however, the district court held a hearing during which the court informed the parties that it was reconsidering, sua sponte, von Drehle's motion for summary judgment. On August 14, 2009, the court entered an order granting summary judgment in von Drehle's favor on the contributory trademark infringement claim. 645 F.Supp.2d 532 (E.D.N.C.2009).

In its summary judgment decision, the district court concluded that Georgia–Pacific failed to adduce sufficient facts to allow a jury to find that von Drehle's sale of its paper towels for use in the GP dispensers caused consumer confusion regarding the identity of the towel manufacturer. Id. at 536–37. The court also found that Georgia–Pacific incorrectly focused on the actual users of the towels in the GP dispensers as the relevant class of persons in the “likelihood of confusion” analysis. Id. at 537. The court held that, instead, the relevant class of consumers in such an analysis was the business owners who purchased the paper towels for use by their patrons. Id.

On appeal, in an opinion issued on August 10, 2010, we vacated the district court's award of summary judgment in favor of von Drehle on the contributory trademark infringement claim, and remanded the matter for further proceedings consistent with our decision. 618 F.3d 441. We concluded that “the district court erred in limiting its likelihood of confusion inquiry to distributors who purchased [the von Drehle paper towels] and their respective end-user customers,” and that the likelihood of confusion inquiry could take into account confusion among the non-purchasing public, such as restroom users. Id. at 453. We further concluded that Georgia–Pacific “proffered sufficient evidence for a reasonable jury to find [a] likelihood of confusion among restroom visitors as to the source of the paper toweling being dispensed from [the GP dispensers] when such dispensers are stuffed with” the von Drehle paper towels. Id. at 454. Accordingly, we held that Georgia–Pacific had satisfied its burden at the summary judgment stage to allow a jury to make the ultimate determination whether von Drehle was liable for contributory trademark infringement.²Id. at 455.

B.

On November 19, 2010, more than three months after we issued our opinion vacating the district court's summary judgment order, and more than two months after our mandate was issued,³ von Drehle sought for the first time to amend its answer to assert the affirmative defenses of claim preclusion and issue preclusion.⁴ The defenses were based on the purported preclusive effect of the Myers judgment entered in July 2009. See Georgia–Pacific Consumer Prod. LP v. Myers Supply, Inc., No. 6:08–cv–6086, 2009 WL 2192721 (W.D.Ark. July 23, 2009) (the Myers decision or the Myers judgment), aff'd,621 F.3d 771 (8th Cir.2010). The district court in Myers found in the defendant distributor's favor, concluding that Georgia–Pacific failed to demonstrate that the defendant distributor's “stuffing” of the von Drehle paper towels in the GP dispensers created a likelihood of confusion.⁵2009 WL 2192721, at *6–8. Notably, von Drehle's trial counsel in the present matter attended the Myers bench trial, and immediately thereafter was made aware of the Arkansas court's judgment.

In total, more than 480 days elapsed between the Arkansas court's decision in Myers and von Drehle's initial attempt in the district court to assert the preclusion defenses based on the Myers holding. As noted above, the district court in the present case initially denied von Drehle's motion to amend its...