DR Distribs., LLC v. 21 Century Smoking, Inc.
| Decision Date | 01 September 2015 |
| Docket Number | No. 12 CV 50324,12 CV 50324 |
| Parties | DR DISTRIBUTORS, LLC, Plaintiff-Counterdefendant, v. 21 CENTURY SMOKING, INC., and BRENT DUKE, Defendants-Counterplaintiffs, v. CB DISTRIBUTORS, INC. and CARLOS BENGOA, Counterdefendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
The plaintiff and/or counter defendants DR Distributors LLC, CB Distributors, Inc. and Carlos Bengoa (collectively "plaintiffs") have withheld the production of four communications with counsel on the basis of the attorney-client privilege. Defendants 21 Century Smoking, Inc. and Brent Duke contend the plaintiffs waived the privilege and filed a motion to compel the production of those communications. For the reasons given, the motion to compel [133] is denied. Telephonic status hearing is set for 9/15/2015 at 9:00AM. By 9/11/2015 counsel shall provide direct-dial numbers for the hearing to the Court's operations specialist, who will initiate the call.
The plaintiff DR Distributors, LLC uses the mark "21st Century Smoke" for its line of e-cigarettes. It sued defendants 21 Century Smoking and Brent Duke (collectively "defendants") for using the admittedly similar mark "21 Century Smoking." The defendants responded with a counterclaim alleging that the plaintiffs infringed their mark and seek to cancel the plaintiffs' mark. Dkt. 88.
During the course of fact discovery, the plaintiffs produced a privilege log identifying four communications with counsel that they withheld on the basis of the attorney-client privilege: (1) an e-mail string dated April 27, 2010, between the plaintiffs and counsel regarding trademark searches by counsel; (2) an e-mail dated May 5, 2010, from counsel to the plaintiffs regarding trademark searches by counsel; (3) an e-mail dated June 17, 2010, from the plaintiffs to counsel seeking an opinion and advice on the existence of the defendant and its website; and (4) an e-mail dated June 25, 2010, from counsel to the plaintiffs regarding the defendant's store in Chicago and the registration of website domain names. See Dkt. 133 Ex. A. During hisdeposition on June 10, 2015, Mr. Bengoa also relied on the attorney-client privilege in response to questions about the plaintiffs' claim that they had no knowledge of the defendants' prior use of "21 Century Smoking" when applying for federal registration of the mark "21st Century Smoke." Dkt. 133 at 2.
Before the Court is the defendants' motion to compel ("Motion") the plaintiffs to produce those four communications identified on the privilege log, and to compel Mr. Bengoa to answer deposition questions about the communications. The defendants contend that information about those four communications should be produced because the information is relevant to the plaintiffs' "knowledge of the trademark '21 Century Smoking' when filing a trademark application for and/or before it began use of the name '21st Century Smoke.'" Dkt. 133 at 1. The defendants contend that the plaintiff waived the attorney-client privilege that might otherwise shield the documents "by asserting reliance on their attorneys' advice or information conveyed by the attorneys on the issue." Dkt. 133 at 3. They argue that the plaintiffs cannot both use evidence of counsel's search to demonstrate their good faith in registering the "21st Century Smoke" mark, but then refuse to produce communications with counsel about the search. The parties do not dispute that the emails are relevant.
The plaintiffs oppose the motion to compel on two grounds. First, they contend that the defendants are engaged in "déjà vu all over again." Response [139] at 3. Specifically, they contend that the defendants already attempted to obtain these privileged communications when they filed a motion for an in camera inspection based on conjectures of bad faith, a move the Court denied without prejudice. See Dkt. 125. They contend the defendants in essence forfeited the "waiver attorney-client privilege" argument they assert now by failing to raise it in their earlier motion. Second, the plaintiffs contend that they are not relying on an advice of counsel defense to the defendant's counterclaim of trademark infringement, but rather at trial will merely rely on evidence that Mr. Bengoa determined for himself based on his own knowledge of the e-cigarette market that the "21st Century Smoke" mark was non-infringing before directing counsel to apply for the mark.
A motion to compel the production of material to which the attorney-client privilege has been asserted falls within the scope of non-dispositive matters that a magistrate judge may decide under Federal Rule of Civil Procedure 72(a). See SmithKline Beecham Corp. v. Apotex Corp., No. 98 CV 3952, 2000 U.S. Dist. LEXIS 13606, at *6 (N.D. Ill. Sept. 13, 2000) (); see also United States v. Balsiger, No. 07 CR 57, 2013 U.S. Dist. LEXIS 96387 at *4 ().
The Court first addresses the plaintiff's argument that the defendants forfeited their waiver argument. The defendants' first attempt to obtain the four communications at issue was amotion to compel the plaintiffs to provide the communications to the Court for an in camera inspection believing the privilege had been waived based on bad faith ("Bad Faith Motion"). In support, the defendants argued that in a declaration submitted in opposition to a motion for partial summary judgment, Mr. Bengoa asserted that he had researched and cleared the "21st Century" mark before registering it, but that the only evidence of whether Mr. Bengoa knew about the defendant's prior use of a similar mark "hides behind the shield of purported privilege." Original Motion to Compel [120] at 5. The defendants speculated that the communications "may indicate that the Plaintiff not only had knowledge of Defendants' senior mark, but intentionally and with bad faith filed its trademark application and fraudulently represented itself as the owner of the mark." Id. Thus, the defendants sought an in camera review to determine if the attorney-client privilege had been waived because the communications "demonstrate Plaintiff's knowledge of Defendant and acts of bad faith on the part of the Plaintiff." Id.
At the April 28, 2015, hearing on the Bad Faith Motion, defense counsel reiterated that the alleged waiver was based on bad faith, specifically, that the communications may reveal that before registering the plaintiff's mark the plaintiff knew of the defendants' prior use of a similar mark. Counsel admitted that if an in camera review revealed no prior knowledge and thus no bad faith, the defendant would have no basis for compelling their production: "if it's not there, we're not entitled to it." Recording of 4/28/2015 Motion Hearing. Nowhere in the Motion or at the hearing did defense counsel assert that the attorney-client privilege was also waived based on an advice of counsel defense. The Court denied the motion to compel without prejudice because the defendants had no threshold evidence of bad faith sufficient to warrant an in camera review.1
Following the Court's adverse ruling on the Bad Faith Motion, the defendants changed course and filed the Motion, this time arguing waiver as a result of reliance on advice of counsel. In support of the Motion, the defendants again rely on the declaration from Mr. Bengoa submitted on November 20, 2013, in opposition to the defendants' motion for partial summary judgment, in which he stated that he "consulted with my legal counsel to see if there was any problem or conflict with using the 21ST CENTURY SMOKE trademark." Dkt. 61-2 ¶ 34. They also rely on Mr. Bengoa's invocation of the attorney-client privilege when asked about his consultations with his legal counsel regarding the mark.
As a general proposition a party must marshal all of its available arguments at the time it asks the Court to resolve an issue. Thus, a party must present all of its evidence at trial and cannot withhold facts for post-trial motions. RKI, Inc. v. Grimes, 200 F. Supp. 2d 916, 921 (N.D. Ill. 2002). Likewise, a party cannot raise arguments for the first time in a motion for reconsideration. See Craft v. Flagg, No. 06 CV 1451, 2009 U.S. Dist. LEXIS 44604 at **3-4 (N.D. Ill. May 22, 2009) (). Here, the defendants' Motion is nothing more than a request toreconsider the denial of the Bad Faith Motion but for reasons not originally presented. The Bengoa declaration, upon which the Motion relies, predates the Bad Faith Motion by nearly 16 months. Therefore, the basis of the Motion was available to the defendants at the time they filed their Bad Faith Motion. As for the more recent invocations of the attorney-client privilege at Mr. Bengoa's June 10, 2015, depositions, by then defense counsel had long known about the consultations with counsel described in Mr. Bengoa's 2013 declaration, and that those specific communications had already been identified on the plaintiffs' privilege log. Therefore, Mr. Bengoa's assertion of the attorney-client privilege at his deposition did not reveal new facts unavailable to the defendant at the time of the Bad Faith Motion.
In short, the waiver argument based on Mr. Bengoa's alleged reliance on advice of counsel could have been presented in the Bad Faith Motion. Indeed, in support of the Motion, the defendants admit that "DRD long ago admitted that it relied in part of its attorney's advice in using the infringing mark," Reply [140] at 4. Accordingly, the waiver argument based on reliance of...
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