Vista Manufacturing, Inc. v. Trac-4, Inc.

131 F.R.D. 134, 15 U.S.P.Q. 2d (BNA) 1345, 1990 U.S. Dist. LEXIS 6569, 1990 WL 71503
CourtDistrict Court, N.D. Indiana
DecidedApril 4, 1990
DocketNo. S89-265
StatusPublished
Cited by17 cases

This text of 131 F.R.D. 134 (Vista Manufacturing, Inc. v. Trac-4, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Indiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Vista Manufacturing, Inc. v. Trac-4, Inc., 131 F.R.D. 134, 15 U.S.P.Q. 2d (BNA) 1345, 1990 U.S. Dist. LEXIS 6569, 1990 WL 71503 (N.D. Ind. 1990).

Opinion

MEMORANDUM AND ORDER

MILLER, District Judge.

Three weeks after the plaintiff commenced this action, the defendants moved for a stay of the proceedings to allow the filing of their motion under Rule 11. The case is now before the court on the Rule 11 motion, in which the sanctions sought include dismissal of the complaint.1 The plaintiff maintains that the defendants filed their Rule 11 motion solely for purposes of delay, which itself would constitute a Rule 11 violation. Each side has lodged serious allegations against the other. The issues are not frivolous, and the reasons for the court’s ruling may not be apparent on the face of the record; accordingly, the court enters this statement of reasons in support of its rulings. See Local 232, Allied Industrial Workers of America v. Briggs & Stratton Corp., 837 F.2d 782, 788 (7th Cir.1988). For the reasons that follow, the court finds no Rule 11 violation.

I. FACTS AND ISSUES

Vista Manufacturing, Inc.’s complaint against Trac-4, Inc., Thomas Cavanaugh, Kevin Yendes, and James Thatcher is in four counts. Count I alleges that the defendants (collectively referred to as “Trac4” unless an individual is referred to specifically) infringed Vista’s patent by selling strip lights covered by the patent. Count II alleges common law claims of unfair competition and misappropriation of trade secrets against Mr. Yendes and Mr. Thatcher, former Vista employees who became employed by Trac-4 and were the “tools” of the violations alleged in Count II. Count III is a state law claim under Indiana’s Uniform Trade Secrets Act, IND. CODE 24-2-3-1 et seq., based on the facts alleged in the first two counts. Count IV relates solely to Mr. Yendes and alleges violation of a non-compete agreement between Vista and Mr. Yendes. Trac-4 has not answered the complaint.

It is undisputed that on April 7, 1989, Vista’s counsel, James D. Hall, sent a letter to Trac-4 asserting that Trac-4 was infringing upon Vista’s patent and requesting Trac-4 to cease and desist. Vista filed its complaint in this suit on June 9, 1989.

It also appears to be undisputed that correspondence occurred between Vista’s counsel and Trac-4’s Chicago, Illinois counsel, Richard E. Alexander. On May 18, Mr. Hall wrote that he was finalizing Vista’s complaint and, unless he received some assurance of the matter’s satisfactory resolu[137]*137tion within a week or two, the complaint would be filed. On May 25, Mr. Alexander wrote that “we are proceeding to evaluate our client’s position in this matter. We have examined the patent and we have also examined the accused devices, as well as the devices made by your client.” Mr. Alexander reported that he had ordered, but had not received, a file history from the Patent Office and requested any available copy from Mr. Hall’s files. The letter further stated, “We have also learned from our client that he believes that the lighting which is the subject matter of the patent, has been in commercial usage for more than one year prior to the filing of the Patent Application. We are presently evaluating this ...” The following day, Mr. Hall sent Mr. Alexander a copy of the patent’s file history and stated that he would wait another ten days before filing suit with the hope that the matter could be resolved.

On June 6, 1989, Mr. Yendes (once a Vista employee, then a Trac-4 employee, and now a defendant in this suit) filed a state court declaratory judgment action against Vista on June 6, 1989, seeking a declaration of rights under the non-compete agreement that forms the basis of Count IV in this suit.

On June 15, six days after this suit was filed, Trac-4 filed a notice of deposition and caused a subpoena duces tecum to be issued to Vista pursuant to Rule 30(b)(6), Fed.R.Civ.P. On June 21 and 22, depositions were taken from Vista’s designated representatives, James Tieszen, Wayne Hensley, and Dwayne Tieszen. Trac-4’s motion to stay followed eight days later.

II. LAW AND ARGUMENTS

Rule 11 provides that when a party or attorney signs a paper filed with the court, he or she certifies that:

(1) to the best of the signer’s knowledge, information, and belief formed after reasonable inquiry, it
(a) is well grounded in fact and
(b) is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that
(2) it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

See generally Kapco Mfg. Co. v. C & O Enterprises, Inc., 886 F.2d 1485, 1491 (7th Cir.1989). A violation of any of these certifications mandates the imposition of sanctions. Shrock v. Altru Nurses Registry, 810 F.2d 658 (7th Cir.1987). Sanctions must be imposed with respect to complaints that violate Rule 11, Medical Emergency Service Associates v. Foulke, 844 F.2d 391, 398-400 (7th Cir.1988), and with respect to Rule 11 motions that themselves violate Rule 11. Local 106 v. Homewood Memorial Gardens, Inc., 838 F.2d 958, 961 (7th Cir.1988). The analysis is an objective one. Golden Eagle Distributing Corp. v. Burroughs, 801 F.2d 1531 (9th Cir.1986); Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 253 (2nd Cir.1985), modified, 821 F.2d 121 (2nd Cir.), cert. denied, 484 U.S. 918, 108 S.Ct. 269, 98 L.Ed.2d 226 (1987); Rodgers v. Lincoln Towing Service, Inc., 771 F.2d 194, 205 (7th Cir.1985). In effect, Rule 11 imposes a negligence standard: an objective failure to use reasonable care. Hays v. Sony Corp. of America, 847 F.2d 412, 418 (7th Cir.1988).

Trac-4 contends that Vista violated each certification under Rule 11: Vista did not engage in reasonable inquiry into the facts with respect to Counts I, II, and III; Vista did not engage in reasonable inquiry into the law with respect to Counts II, III, and IV; and Vista filed its complaint for an improper purpose, specifically, to drive Trac-4 out of competition with Vista.

The law of Rule 11 places both sides of this dispute in a challenging position. From the plaintiff’s perspective, Rule 11 was not intended to be a discovery device. Chipanno v. Champion Int’l Corp., 702 F.2d 827, 831 (9th Cir.1983) (Rule 11 “is not to be used to require plaintiff to offer proof of his case through supplemented Rule 11 certificates before discovery and before trial”). A plaintiff should not be required to lay bare its case, or reveal its [138]*138work-product, simply because a Rule 11 motion is lodged against it. Yet as Trac-4 notes, when the filing of a complaint is alleged to be the violation, the test under Rule 11 is what the plaintiff knew when the complaint was filed, not what was learned later.

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131 F.R.D. 134, 15 U.S.P.Q. 2d (BNA) 1345, 1990 U.S. Dist. LEXIS 6569, 1990 WL 71503, Counsel Stack Legal Research, https://law.counselstack.com/opinion/vista-manufacturing-inc-v-trac-4-inc-innd-1990.