Bullets2bandages, LLC v. Caliber Corporation

• Court: District Court, S.D. California
• Decided: November 1, 2019
• Docket: 3:18-cv-00669
• Status: Unknown

Opinion

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 THIRD PARTY DEFENDANT 2 MONKEY 11 v. TRADING LLC’S MOTION TO SUBTITUTE IT IN PLACE OF 12 CALIBER CORPORATION, an Illinois PLAINTIFF corporation, BULLETS2BANDAGES, LLC 13 Defendant. 14 [Dkt. No. 49.] 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 Counterclaim- Plaintiffs, 4 v. 5 CALIBER CORPORATION, an Illinois 6 Corporation,

7 Third Party Counterclaim- Defendant. 8 9 10 Before the Court is Third Party Defendant/Third Party Counterclaim Plaintiff 2 11 Monkey Trading LLC’s (“2 Monkey”) motion to substitute it in the place and stead of 12 Plaintiff/Counterclaim-Defendant Bullets2Bandages, LLC (“B2B”) pursuant to 13 Federal Rule of Civil Procedure 25(c). (Dkt. No. 49.) On October 4, 2019, Defendant/ 14 Third-Party Plaintiff/Counterclaim Plaintiff/Third Party Counterclaim-Defendant 15 Caliber Corporation (“Caliber”) filed an opposition. (Dkt. No. 55.) On October 11, 16 2019, 2 Monkey filed a reply. (Dkt. No. 26.) Based on the reasoning below, the Court 17 DENIES 2 Monkey’s motion to substitute. 18 Background 19 Plaintiff Bullets2Bandages, LLC (“B2B”) and Caliber both manufacture and sell 20 bullet-shaped bottle openers. (Dkt. No. 5 at 91; Case No. 13cv3134-CAB(BLM), Dkt. 21 No. 1, Compl. ¶ 11.) In 2013, in case no. 13cv3134-CAB(BLM), B2B filed a complaint 22 against Caliber for trademark infringement of B2B’s U.S. Trademark Registration No. 23 4,364,453 for the mark CALIBER. (Case No. 13cv3134-CAB(BLM), Dkt. No. 1, 24 Compl.) In turn, Caliber filed a counterclaim against B2B for Caliber’s Trademark 25 Application No. 85/588,703 for its Bullet Design mark. (Id., Dkt. No. 15.) Application 26

27 1 Page numbers are based on the CM/ECF pagination. 1 No. 85/588,703 became U.S. Trademark Registration No. 4,630,557 on November 7, 2 2014. (Dkt. No. 5 at 9.) 3 On June 9, 2014, B2B and Caliber entered into a settlement agreement in Case 4 No. 13cv3134-CAB(BLM). (Dkt. No. 1 Compl. ¶ 9.) As part of the settlement 5 agreement, B2B assigned to Caliber all rights to the CALIBER mark and agreed to not 6 use the phrase “the ORIGINAL”2 in relation with its sale of bullet-shaped bottle 7 openers.3 (Dkt. No. 5, Counterclaim/TPC ¶ 23.) On June 9, 2014, B2B’s U.S. 8 Trademark Registration No. 4,364,453 was assigned to Caliber in exchange for good 9 and valuable consideration. (Id. ¶ 18.) In exchange, Caliber granted B2B a worldwide, 10 non-exclusive license to both the CALIBER mark and the Bullet Trade Dress.” (Id. ¶ 11 23.) 12 The underlying complaint alleges that B2B, relying on the settlement agreement, 13 manufactured products that it then sells to wholesalers, such as 2 Monkey (a/k/a Lucky 14 Shot) who sells the products directly to consumers. (Dkt. No. 1, Compl. ¶ 11.) 2 15 Monkey sells B2B’s products through Amazon and Etsy. (Id.) B2B learned that 16 someone complained that 2 Monkey’s products were infringing. (Id. ¶ 12.) Due to the 17 complaints, Amazon and Etsy removed 2 Monkey’s listings from their websites, 18 barring it from engaging in any sales of B2B’s products. (Id.) 19 B2B suspected Caliber complained to Amazon and Etsy and when it contacted 20 Caliber, it was slow to respond despite the substantial financial damage to B2B for 2 21 Monkey’s inability to sell its products. (Id. ¶¶ 14-16.) Then Caliber told B2B that it 22 was disappointed that B2B had signed an agreement with 2 Monkey. (Id. ¶ 17.) Instead 23 of raising an issue concerning the Settlement Agreement, it asked B2B to repudiate its 24 agreement with 2 Monkey so that B2B and Caliber could work together to make 2 25

26 2 Caiber also owns trademark Registration No. 4,930,487 for the mark, ORIGINAL .50 CALIBER BOTTLE OPENER. (Dkt. No. 5, Counterclaim/TPC ¶ 19.) 27 3 On January 16, 2014, Caliber filed a petition for cancellation of B2B’s CALIBER mark. (Dkt. No. 5, Counterclaim/TPC ¶ 22.) 1 Monkey pay a higher rate. (Id.) Caliber also threatened that it would begin licensing 2 the CALIBER Mark and Bullet Trade Dress to anyone so that the market would be 3 flooded ultimately taking sales away from B2B and 2 Monkey. (Id. ¶ 18.) 4 Consequently, on April 3, 2018, B2B filed the underlying complaint against 5 Caliber for breach of contract, interference with existing contractual relations, 6 interference with prospective economic advantage and unfair competition under 7 California Business & Professions Code section 17200 et seq. (Dkt. No. 1, Compl.) 8 On April 27, 2018, Defendant Caliber filed its Answer and a Counterclaim 9 against B2B for breach of contract, interference with prospective economic advantage 10 and negligent misrepresentation, unfair competition, two counts of federal unfair 11 competition pursuant to 15 U.S.C. § 1125(a) and two counts of trademark infringement 12 of U.S. Trademark Registration No. 4,930,487 (THE ORIGINAL .50 CALIBER 13 BOTTLE OPENER) and the U.S. Trademark Registration No. 4,364,4534 (CALIBER) 14 pursuant to 15 U.S.C. § 1114. (Dkt. No. 5.) Caliber also filed a Third Party Complaint 15 (“TPC”) against Third Party Defendants Lucky Shot and 2 Monkey. (Id.) In the TPC, 16 Caliber alleges eight causes of action of common law unfair competition, three counts 17 of trademark infringement of U.S. Trademark Registration No. 4,630,557 (Bullet 18 Design mark), U.S. Trademark Registration No. 4,364,453 (CALIBER) and U.S. 19 Trademark Registration No. 4,930,487 (ORIGINAL .50 CALIBER BOTTLE 20 OPENER) pursuant to 15 U.S.C. § 1114; three counts of federal unfair competition 21 pursuant to 14 U.S.C. § 1125(a), and counterfeiting. (Dkt. No. 5 at 22-29.) 22 On June 8, 2018, B2B filed its answer to Caliber’s counterclaims. (Dkt. No. 22.) 23 On August 7, 2018, Third Party Defendants 2 Monkey and Lucky Shot filed their 24 Answer to the TPC and a Counterclaim against Caliber seeking a declaration that 25 Trademark No. 4,630,557 is invalid, Cancellation of Federal Trademark Registration

26 4 While the eighth counterclaim alleges federal trademark infringement for the CALIBER Mark, it lists U.S. 27 Registration No. 4,930,487. (Dkt. No. 5, Counterclaim/TPC ¶ 117.) However, the CALIBER mark is U.S. Trademark Registration No. 4,364,453. It appears that this may be an oversight by Caliber. 1 No. 4,630,557, Cancellation of Federal Trade Mark Registration No. 4,364,453, and 2 Cancellation of Federal Trademark Registration No. 4,930,487. (Dkt. No. 28.) On 3 August 28, 2018, Caliber filed its answer to the Third-Party Defendants’ Counterclaim. 4 (Dkt. No. 30.) 5 On September 12, 2019, B2B sold all of its business assets related to bullet 6 bottle openers, including the settlement agreement, which is at issue in this case to 2 7 Monkey Trading. (Dkt. No. 49-2, Keener Decl. ¶ 2, Ex. A.) 8 In its motion, 2 Monkey seeks to substitute itself in place of B2B. It contends 9 that because 2 Monkey has all right, title and interest in the settlement agreement, it is 10 now the real party in interest in the subject litigation. Substitution is appropriate, it 11 maintains, because B2B transferred production assets under the APA. Moreover, 12 B2B also transferred all rights to the claims that B2B had in this case and 2Monkey 13 agreed to defend and indemnity B2B against any claims and defenses in the case. 14 They also mutually agreed that 2Monkey shall have the right to substitution on behalf 15 of Caliber in the case. The parties agreed to transfer all rights and obligations in the 16 instant action from B2B to 2Monkey. 17 Caliber opposes arguing that B2B and 2 Monkey are already parties to the 18 litigation, 2 Monkey has not truly stepped in the shoes of B2B and is not the real 19 party in interest with respect to claims by and against B2B, dismissal of B2B would 20 greatly complicate the case, “the Asset Purchase Agreement” is now in dispute and 21 creates new causes of action against B2B and dismissal of B2B would reward its bad 22 faith tactics throughout the litigation. (Dkt. No. 55 at 6.) 23 Discussion 24 A. Federal Rule of Civil Procedure 26(c) 25 Federal Rule of Civil Procedure (“Rule”) 25(c) provides that if “an interest is 26 transferred, the action may be continued by or against the original party unless the 27 court, on motion, orders the transferee to be substituted in the action or joined with 1 the original party.” Fed. R. Civ. P. 25(c). “Substitution or joinder is not mandatory 2 where a transfer of interest has occurred.” Sun-Maid Raisin Growers of Cal. v. Cal. 3 Package Corp., 273 F.2d 272, 284 (9th Cir. 1959). The trial court has discretion to 4 grant or deny substitution under Rule 25(c). In re Bernal, 207 F.3d 595, 598 (9th Cir. 5 2000); Fed. R. Civ. P. 25 (“If an interest is transferred, the action may be continued 6 by or against the original party unless the court, on motion, orders the transferee to be 7 substituted in the action or joined with the original party.”). Rule 25(c) is procedural, 8 not substantive and does not create any new relationships; rather Rule 25(c) is 9 “designed to allow the action to continue unabated when an interest in the lawsuit 10 changes hands.” In re Bernal, 207 F.3d at 598 (“The action may be continued by or 11 against the original party, and the judgment will be binding on his successor in 12 interest even though he is not named.”). 13 “Whether a court should exercise its discretion in favor of substitution turns on 14 whether the addition of the transferee will facilitate the conduct of the litigation.” 15 Toll Ca, L.P. v. American Safety Indemnity Co., 16cv1523-BTM-AGS, 2017 WL 16 2628059, at *5 (S.D. Cal. June 16, 2017) (citing In re Bernal, 207 F.3d at 599); 17 NRDC v. Texaco Refining and Mktg., Inc., 2 F.3d 493, 506 (3d. Cir. 1993) (“Joinder 18 of the transferee is unnecessary unless the trial court makes a discretionary 19 determination that the transferee's presence would facilitate the case.”). 20 First, Caliber challenges whether there has been a “transfer of interest” subject 21 to Rule 25(c). According to caselaw, a “transfer of interest” as applied to Rule 25(c) 22 has required that the assets as well as liabilities be transferred. See Zest IP Holdings, 23 LLC v. Implant Direct Mfg., LLC, No. 10cv0541–GPC–WVG, 2013 WL 1626111, at 24 *1 (S.D. Cal. Apr. 15, 2013) (citing Wainwright v. Kraftco Corp., 58 F.R.D. 9, 13 25 (N.D. Ga. 1973) (“[a]corporation's purchase of all assets of corporate defendant 26 constitutes a ‘transfer of interest’ under Rule 25(c), and court appropriately ordered 27 joinder where purchasing corporation would have burden of liability as result of its 1 purchase.”); Mitnick v. davisREED Constr., Inc., Case No. 17cv747-H(WVG), 2019 2 WL 1572988, at *3 (S.D. Cal. Apr. 11, 2019) (noting that Rule 25(c) does not apply 3 because the assignment for the benefit of credits assigned all goods, bonds, notes, 4 books of account, contracts, rights and credits but did not transfer counterdefendant’s 5 liability to the assignee); see also In re Pub. Paper Antitrust Litig., Civil Action No. 6 3:04md1631 (SRU), 2013 WL 3155371, at *3-4 (D. Conn. June 20, 2013) (denying 7 motion for substitution where third party had agreed only to indemnify defendant for 8 losses solely related to the case and not assume defendant’s liability directly); 9 Centillion Data Sys., Inc. v. Am. Mgmt. Sys., Inc., 200 F.R.D. 618, 620 (S.D. Ind. 10 2001) (denying motion under Rule 25(c) because it was not known whether the party 11 substituting in would assume the liabilities of the existing party). 12 Here, there is no indication in the APA whether 2 Monkey has accepted B2B’s 13 liabilities. The APA provides, under the heading California Lawsuit, “2 Monkey 14 hereby agrees to defend and indemnify B2B for any losses or damages incurred by 15 B2B arising out of claims, counterclaims, or defenses asserted in [this action].” (Dkt. 16 No. 49-3, Ex. A at 2, APA ¶ 3.) The indemnity provision is limited and applies only 17 to any losses incurred in this case. The APA does not provide that 2 Monkey 18 assumes all of B2B’s liability. Therefore, the Court DENIES 2 Monkey’s motion on 19 this ground. See In re Pub. Paper Antitrust Litig., 2013 WL 3155371, at *3-4 20 (denying motion for substitution where third party had agreed only to indemnify 21 defendant for losses solely related to the case and not assume defendant’s liability 22 directly). 23 In addition, in ruling on Rule 25(c), the Court considers whether litigation will 24 be facilitated by substituting 2 Monkey in place of B2B. The Court agrees with 25 Caliber that adding 2 Monkey will only further complicate an already complicated 26 case. Caliber argues that the APA will require additional discovery from B2B about 27 the APA as well as potential trademark infringement by B2B as the APA purports to 1 || retroactively create new rights. In fact, recently Caliber has filed a motion seeking 2 || additional discovery on the APA as well as a motion for leave to file an amended 3 |) counterclaim alleging these claims as a result of the APA. (Dkt. Nos. 57, 58.) 4 || Therefore, if B2B is substituted out, Caliber will have to file a new lawsuit against 5 || B2B based on these overlapping issues. This is contrary to the purpose of Rule 25(c). 6 || Further, if B2B is substituted out, it will become a non-party participant which 7 creates an additional hurdle for not only discovery but also for trial. B2B is a key 8 || party in the underlying complaint alleging breach of contract to the settlement 9 agreement entered into in Case No. 13cv3134-CAB(BLM) and forms the basis of the 10 |}counterclaims, third party complaint and third-party counterclaims. The Court 11 concludes that litigation would not be facilitated but would instead be complicated if 12 ||2 Monkey was substituted in the place of B2B. In sum, the Court exercises its broad 13 || discretion and DENIES 2 Monkey’s motion to substitute. 14 Conclusion 15 Based on the above, the Court DENIES B2B’s motion to substitute 2 Monkey in 16 || the place of B2B. The hearing set for November 8, 2019 shall be vacated. 17 IT IS SO ORDEDED. 18 19 Dated: November 1, 2019 7 sale 0s ( 20 Hon. Gonzalo P. Curiel United States District Judge 22 23 24 25 26 27 gg Case No. 3:18-cv-00669-GPC-KSC