Bimbo Bakeries USA, Inc. v. Sycamore

• Decision Date: 18 March 2022
• Docket Number: No. 18-4062, No. 19-4031, No. 19-4040,18-4062
• Citation: 29 F.4th 630
• Parties: BIMBO BAKERIES USA, INC., Plaintiff - Appellee/Cross-Appellant, v. Leland SYCAMORE, Defendant - Appellant/Cross-Appellee. Bimbo Bakeries USA, Inc., Plaintiff - Appellant, v. Leland Sycamore; United States Bakery, Defendants – Appellees. Bimbo Bakeries USA, Inc., Plaintiff - Appellee, v. Leland Sycamore, Defendant, and United States Bakery, Defendant - Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

29 F.4th 630

BIMBO BAKERIES USA, INC., Plaintiff - Appellee/Cross-Appellant,

v.Leland SYCAMORE, Defendant - Appellant/Cross-Appellee.

Bimbo Bakeries USA, Inc., Plaintiff - Appellant,

v.Leland Sycamore; United States Bakery, Defendants – Appellees.

Bimbo Bakeries USA, Inc., Plaintiff - Appellee,

v.Leland Sycamore, Defendant,andUnited States Bakery, Defendant - Appellant.

No. 18-4062

No. 19-4031

No. 19-4040

United States Court of Appeals, Tenth Circuit.

FILED March 18, 2022

Steven Wilker(Christopher Pallanch, Robert Koch, and Jeffrey Bradford, with him on the briefs), Tonkon Torp LLP, Portland, Oregon, for Defendant - Appellant/Cross-Appellee United States Bakery.

Sean N. Egan, Law Office of Sean Egan, Salt Lake City, Utah, for Defendant - Appellant/Cross-AppelleeLeland Sycamore.

Charles A. Burke, Womble Bond Dickinson LLP, Raleigh, North Carolina (Juliette P. White, Parsons Behle & Latimer, Salt Lake City, Utah, with him on the briefs), for Plaintiff - Appellee/Cross-AppellantBimbo Bakeries USA, Inc.

Before HARTZ, PHILLIPS, and EID, Circuit Judges.

EID, Circuit Judge.

These consolidated appeals concern claims of unfair competition in the bread industry.Bimbo Bakeries USA, Inc.("Bimbo Bakeries") owns, bakes, and sells Grandma Sycamore's Home-Maid Bread ("Grandma Sycamore's").Bimbo Bakeries alleges that United States Bakery ("U.S. Bakery"), a competitor, and Leland Sycamore("Leland"), the baker who developed the Grandma Sycamore's recipe, misappropriated its trade secret for making Grandma Sycamore's.Bimbo Bakeries further claims that U.S. Bakery infringed upon Grandma Sycamore's trade dress when it sold a comparable bread product, Grandma Emilie's, and engaged in false advertising when it used the tagline "Fresh.Local.Quality."The district court granted summary judgment in favor of U.S. Bakery on the trade dress infringement claim.The parties went to trial on the other two claims, and the jury returned a verdict in favor of Bimbo Bakeries on both.After the trial, the district court denied U.S. Bakery's and Leland's renewed motions for judgment as a matter of law on the trade secrets misappropriation and false advertising claims.The district court did, however, remit the jury's damages award.

Bimbo Bakeries, U.S. Bakery, and Leland all appeal.Bimbo Bakeries argues the district court should not have granted U.S. Bakery summary judgment on its trade dress infringement claim and should not have remitted damages for the false advertising claim.U.S. Bakery and Leland argue the district court should have granted their renewed motions for judgment as a matter of law, and Leland makes additional arguments related to his personal liability.Exercising jurisdiction under 28 U.S.C. § 1291, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion because all Bimbo Bakeries’ claims fail as a matter of law.

I.

a.

In 1979, Leland Sycamore developed the recipe and process for making Grandma Sycamore's Home-Maid Bread.As the name suggests, Grandma Sycamore's seeks to emulate bread made at home—for example, the bread is baked in a special pan so that two loaves can be pulled apart, giving the bread a "breakaway side"—and falls under the commercial category of homemade bread products.SeeU.S. Bakery Aplt. Br.at 4.The bread has been immensely popular in Utah.Leland parted with his interest in Grandma Sycamore's in 1998 and opened his own bakery, which became Wild Grains Bakery LLC("Wild Grains Bakery"), with his son Tyler.By 2013, EarthGrains Baking Companies, Inc.("EarthGrains") owned the rights to the bread.

Although Grandma Sycamore's is dominant, it has not been without competitors.One full-line bakery, Hostess, also made and sold a homemade bread product in Utah known as Grandma Emilie's.But Hostess went bankrupt in late 2012, taking Grandma Emilie's off the market.Hostess's bankruptcy, however, created an opportunity for U.S. Bakery, a bread company based in Portland, Oregon, to enter the Utah market and produce a product that could compete with Grandma Sycamore's.

From the Hostess liquidation, U.S. Bakery acquired various assets, including a Salt Lake City bakery, several warehouses throughout Utah, and Grandma Emilie's.With its new assets, U.S. Bakery sought to reopen the Salt Lake City bakery and relaunch Grandma Emilie's.U.S. Bakery hired Wild Grains Bakery—Leland's bakery—to produce the bread.This relationship soon soured due to quality control problems.At the same time as the arrangement with Wild Grains Bakery went awry, the long-term prospects of the Salt Lake City site looked bleak.U.S. Bakery decided to make Grandma Emilie's in-house around July 2013 and closed its Salt Lake City bakery in October 2013.

U.S. Bakery's plan was to develop a new formula for Grandma Emilie's and produce it at its bakery in Nampa, Idaho. U.S. Bakery transferred one of its employees, Jeremy Faull, to the Nampa bakery to help with the Grandma Emilie's project.Faull previously worked for Leland.By January 2014, U.S. Bakery was able to develop a recipe for Grandma Emilie's that it thought could compete with Grandma Sycamore's.

In addition to developing the Grandma Emilie's recipe, U.S. Bakery created three iterations of packaging for the bread.In designing the packaging, U.S. Bakery took into consideration the packaging used for Grandma Sycamore's.Because EarthGrains thought the first iteration was too similar to its own packaging, EarthGrains wrote to U.S. Bakery complaining that the packaging infringed on Grandma Sycamore's trade dress.

U.S. Bakery used several taglines to help sell its products.One was "Fresh.Local.Quality."U.S. Bakery displayed the tagline at points of sale and placed the tagline on its trucks.U.S. Bakery started using this tagline in 2012, before it entered the Utah market.In addition to the Salt Lake City location, U.S. Bakery had bakeries in Alaska, Idaho, Montana, Oregon, and Washington.It sold bread products under the "Fresh.Local.Quality." tagline throughout those states regardless of where the products were baked, as well as in California and Wyoming, before moving away from the tagline in mid-2015. U.S. Bakery also adopted an additional tagline after expanding into Utah, "Freshly Baked in Utah."It stopped using this tagline when it shut down the Salt Lake City bakery in 2013.

b.

On August 7, 2013, EarthGrains sued Leland, Tyler Sycamore(Leland's son), Wild Grains Bakery, and U.S. Bakery.In its complaint, EarthGrains alleged three causes of action.First, EarthGrains claimed the defendants misappropriated its production process for Grandma Sycamore's, a trade secret, when creating the new recipe for Grandma Emilie's in violation of the Utah Uniform Trade Secrets Act.Second, EarthGrains claimed the defendants infringed on its trade dress when creating the packaging for Grandma Emilie's in violation of the Lanham Act.Last, EarthGrains claimed the defendants unlawfully diluted its trade dress in violation of the Lanham Act.

In January 2014, EarthGrains transferred almost all its assets, including its interest in Grandma Sycamore's, to its parent company, Bimbo Bakeries.On December 15, 2014, Bimbo Bakeries filed an amended complaint.In it, Bimbo Bakeries brought a fourth cause of action against U.S. Bakery for false designation of origin, false advertising, and unfair competition in violation of the Lanham Act.According to Bimbo Bakeries, U.S. Bakery's use of its taglines constituted false or misleading advertising because U.S. Bakery did not actually bake all its bread products within the state of sale.

These appeals involve the trade dress infringement claim against U.S. Bakery, the trade secrets misappropriation claim against U.S. Bakery and Leland, and the false advertising claim against U.S. Bakery as it relates to U.S. Bakery's use of the tagline "Fresh.Local.Quality."The district court granted U.S. Bakery summary judgment on the trade dress infringement claim.The parties went to trial on the trade secrets misappropriation and false advertising claims, and the jury found in Bimbo Bakeries’ favor on both.In a special verdict, the jury found Bimbo Bakeries suffered $2,105,256 in damages from the misappropriation, allocating $1,578,942 to U.S. Bakery and the remaining $526,314 to Leland.Because the jury found by clear and convincing evidence that U.S. Bakery willfully and maliciously misappropriated Bimbo Bakeries’ trade secret, the district court increased the damages owed by U.S. Bakery by $789,471.The district court permanently enjoined U.S. Bakery and Leland from using Bimbo Bakeries’ trade secret.

The jury also found Bimbo Bakeries suffered $8,027,720 in damages as a result of U.S. Bakery's profits from using the tagline "Fresh.Local.Quality."The district court remitted this damages award to $83,398.Finally, the district court denied renewed motions by U.S. Bakery and Leland for judgment as a matter of law for the trade secrets misappropriation and false advertising claims.

Bimbo Bakeries, U.S. Bakery, and Leland all appeal.In Case No. 19-4031, Bimbo Bakeries argues the district court should not have granted U.S. Bakery summary judgment on its trade dress infringement claim and should not have remitted damages for the false advertising claim.U.S. Bakery, in Case No. 19-4040, and Leland, in Case No. 18-4062, argue the district court should have granted their renewed motions for judgment as a matter of law.Leland raises additional arguments concerning his personal liability for the misappropriation claim.

II.

We first address the claim that was resolved on summary judgment—Bimbo Bakeries’ claim that U.S. Bakery infringed on its trade dress.According to Bimbo Bakeries, the Grandma Sycamore's trade dress includes the following elements: "(1) a horizontally-oriented label; (2) a design placed at the top center of the end; (3) the word ‘White’ in red letters; (4) the use of a red, yellow, and white color scheme; and (5) stylized...