Food Market Merchandising, Inc. v. California Milk Processor Board

District Court, E.D. California·Decided June 2, 2022·No. 2:15-cv-01083·Unknown

Opinion

FOOD MARKET MERCHANDIZING, No. 2:15–cv–1083–TLN–CKD INC., Plaintiff, ORDER ON MOTION FOR PROTECTIVE v. ORDER CALIFORNIA MILK PROCESSOR (ECF No. 126) Defendant. CALIFORNIA MILK PROCESSOR Counterclaimant, v. INC., et al. Counterdefendants. Presently before the court is defendant and counterclaimant California Milk Processor Board (“the CMPB” or “the Board”)’s motion for a protective order limiting the scope of the Rule 30(b)(6) deposition noticed by plaintiff and counterdefendant Food Market Merchandising, Inc. (“FMMI”).1 (ECF No. 126.) The parties filed a joint statement regarding the discovery dispute. (ECF No. 126.1.) The court heard remote arguments on the motion on June 1, 2022. Thomas Knox appeared for defendant the CMPB; and Howard Sagaser and Carl Christensen appeared for plaintiff FMMI. For the following reasons, the court GRANTS defendant’s motion for protective order. A. The Underlying Action The California Milk Processor Board is “an instrumentality existing under the laws of the State of California and the regulations promulgated by the California Department of Food and Agriculture.” (Third Am. Answer & Counterclaim (“TAAC”), ECF No. 91 at 2.) “CMPB was created in 1993 to market and promote the consumption of fluid milk in the State of California.” (TAAC ¶ 37.) The CMPB created the well-known “got milk?” advertising campaign and is the owner of federally registered GOT MILK? trademarks and service marks. (Id.) FMMI is a Minnesota corporation and for a time was the licensee of the GOT MILK? trademark (“the Mark”) for “flavored drinking straws, toys, novelties, household products, confections, and personal care items.” (Amended Complaint, ECF No. 11 ¶ 6.) The CMPB and FMMI entered a Licensing Agreement for said license effective November 3, 2011. (Id. ¶ 9.) Due to a series of events not relevant to the instant deposition dispute, the CMPB terminated the Agreement as of 2014 and required FMMI to stop distributing products bearing the Mark. (TAAC, Counterclaim ¶¶ 82, 93.) According to CMPB, FMMI did not stop. (Id. ¶¶ 93, 126.) However, it was FMMI that first brought suit related to the Mark. In 2015, FMMI sued the CMPB (in the Southern District of New York) for one count of trademark abandonment on a “naked licensing” theory.2 (ECF No. 11.) The central claim of FMMI’s nine-page operative 1 This matter was referred to the undersigned pursuant to Eastern District of California Local Rule 302(c)(1) and 28 U.S.C. § 636(b)(1). For simplicity, the court refers to the parties simply as plaintiff and defendant, except where reference to the counterclaims dictates otherwise.

2 As explained more fully below, “naked licensing” occurs when the trademark owner/licensor “fails to exercise adequate quality control over the licensee” and thereby abandons its rights to the mark. FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 515-16 (9th Cir. 2010). complaint is that “[b]y failing to exercise any actual quality control over the Mark and failing to include meaningful minimum quality control standards in the Agreement, CMPB engaged in naked licensing and has abandoned its rights in the Mark.” (Id. ¶ 39.) On that ground, FMMI seeks a declaration that the CMPB has “abandoned any rights it might otherwise have had in the Mark” and that FMMI “is the rightful owner of the Mark.” (Id. at 8-9, ¶¶ 47-48.) After successfully having the case transferred to this district, the CMPB brought countersuit against FMMI and related employees and entities with counterclaims for trademark infringement, unfair competition, false designation of origin, fraud, and breach of contract, among others. (ECF Nos. 22, 53, 91 (series of amended answers and counterclaims).) In May 2020, the district judge dismissed the CMPB’s counterclaims for trademark dilution and contract rescission but allowed the rest to proceed. (ECF No. 113.) Thereafter, FMMI and the other counterdefendants filed an answer. As relevant to this dispute, the answer asserts 31 affirmative defenses, 18 of which contend (in a variety of fashions) that the CMPB is not authorized to own a trademark at all, or at least is not authorized to license that trademark to promote or otherwise advertise products that are not “fluid milk” or do not touch and concern the State of California. (Answer, ECF No. 114 at 25-32.) These 18 affirmative defenses are all based on counterdefendants’ reading of the CMPB’s authorizing sources of law: (A) the California Marketing Act of 1937, Cal. Food & Agr. Code §§ 58601-59293 (“the Act”), and (B) the “Marketing Order for Advertising, Promotion, Research Education Relating to Fluid Milk Products in California” (the “Marketing Order”). (See Answer at 27.) “The Act calls for the issuance of marketing orders by the [California] Director of Food and Agriculture upon approval of the producers and handlers of that commodity which is its subject. Marketing orders can encompass a variety of activities including advertising programs. The Act also provides for an Advisory Board composed of producers of the subject commodity. The operations of the advisory boards are financed by a tax on the producers.” State of Cal. ex rel. Christensen v. F.T.C., 549 F.2d 1321, 1323 n.1 (9th Cir. 1977). “[T]he director may issue marketing orders which regulate producer marketing, the processing, distributing, or handling in any manner of any commodity by any and all persons that are engaged in such producer marketing, processing, distributing, or handling of such commodity within this state [of California].” Cal. Food & Agric. Code § 58741; see Gallo Cattle Co. v. California Milk Advisory Bd., 185 F.3d 969, 970–71 (9th Cir. 1999) (discussing the Act and mechanics of another milk- related marketing order).3 Pursuant to that authority, in 1993 the California Department of Food and Agriculture issued the Marketing Order that counterdefendants identify in their affirmative defenses. See Marketing Order for Advertising, Promotion, Research, and Education Relating to Fluid Milk Products in California (eff. Jan. 1, 1993, incorporating amendments through June 10, 2019), available at https://www.cdfa.ca.gov/mkt/mkt/pdf/fluidmilk.pdf. This Marketing Order is what established the CMPB. See Marketing Order, Art. I, § A, ¶ 8 (“‘Board’, ‘Advisory Board’, and ‘Processor Advisory Board’, are synonymous terms that mean the California Milk Processor Board established pursuant to this Marketing Order.”). B. The Discovery Dispute On April 8, 2022, FMMI served notice that on May 4, 2022, it would take the deposition of the CMPB’s “person most qualified” under Rule 30(b)(6). (ECF No. 126.1 at 12, Ex. A.) The notice listed 12 topics for examination. (Id. at 13-14.) The CMPB’s counsel sent FMMI’s counsel a letter objecting to nine of the listed topics, and through meet-and-confer efforts, the parties reached agreement as to four disputed topics—leaving five topics to be addressed on this motion. (Id. at 3-4.) On May 4, 2022, the CMPB filed this motion for protective order under Rule 26(c) (ECF No. 126), requesting that the court prohibit FMMI from inquiring into the following topics at the Rule 30(b)(6) deposition: 6. The amount of commercial licensing that the CMPB receives from “Got Milk?” from January 1, 2010 to the present. 7. How “Got Milk?” has increased California milk consumption from January 1, 2010 to the present.

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Food Market Merchandising, Inc. v. California Milk Processor Board, (E.D. Cal. 2022).

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