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Ferrellgas, L.P. v. Best Choice Products

United States District Court, M.D. North Carolina

July 24, 2017

FERRELLGAS, L.P. and BLUE RHINO GLOBAL SOURCING, INC. Plaintiffs,
v.
BEST CHOICE PRODUCTS a/k/a SKY BILLIARDS, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Loretta C. Biggs United States District Judge.

         Plaintiffs initiated this action on March 31, 2016, alleging trademark infringement and unfair competition under 15 U.S.C. §§ 1114 and 1125, as well as unfair and deceptive trade practices under N.C. Gen Stat. § 75 et seq. (ECF No. 1.) Before the Court are Plaintiffs' Motion for Summary Judgment, (ECF No. 27), Plaintiffs' Motion for Sanctions, (ECF No. 29), and Defendant's Motion for Leave to Amend Defendant's Responses to Plaintiffs' First Set of Requests for Admissions (“Motion to Amend”), (ECF No. 31). For the reasons set forth below, Plaintiffs' Motion for Summary Judgment will be granted in part and denied in part; Plaintiffs' Motion for Sanctions will be granted; and Defendant's Motion to Amend will be denied.

         I. BACKGROUND

         Plaintiff Ferrellgas, L.P. (“Ferrellgas”) describes itself as a propane provider, “serving approximately one million customers throughout the United States and Puerto Rico.” (ECF No. 1 ¶ 10.) Plaintiff Blue Rhino Global Sourcing, Inc. (“Blue Rhino”), a subsidiary of Ferrellgas, describes itself as “a leading distributor of outdoor living accessories, including outdoor fireplaces, heaters, grills, and related products.” (Id. ¶ 11.)

         Ferrellgas owns the following trademarks: (i) U.S. Trademark Registration No. 2, 912, 949, issued on December 21, 2004 for the mark “BLUE RHINO, ” which was first used in commerce as early as 1994, (id. ¶ 12; ECF No. 32 at 6); and (ii) U.S. Trademark Registration No. 3, 160, 502, issued on October 17, 2006 for the mark “BLUE RHINO, ” which was first used in commerce as early as 2000, (ECF No. 1 ¶ 13; ECF No. 32 at 6). Both marks have been accorded incontestable status under 15 U.S.C. § 1065.[1] (ECF No. 1 ¶¶ 12, 13; ECF No. 32 at 6.) Blue Rhino uses the mark “BLUE RHINO” in commerce “in connection with outdoor fireplaces, among other things.” (ECF No. 1 ¶ 14; ECF No. 32 at 6.)

         In 2012, Blue Rhino designed a “Uniflame Hex Shaped Outdoor Fire Bowl” fireplace product (“Hex Fireplaces”) and selected Dingfu, a company in Gaungzhou, China, as its manufacturer for the product. (ECF No. ¶¶ 16-17.) In 2015, Blue Rhino made advance payments of over $100, 000 to Dingfu to manufacture approximately 2, 600 Hex Fireplaces. (Id. ¶ 17.) Following these advance payments, “but prior to shipment of the Hex Fireplaces . . . Dingfu ceased operations and was seized by the Chinese government.” (Id. ¶ 18.) Blue Rhino then retained a different manufacturer for its Hex Fireplaces. (Id.) Blue Rhino offers its Hex Fireplaces for sale at the price of $125.99 through Amazon, among other online retailers. (Id. ¶ 19; ECF No. 1-1.)

         Defendant Best Choice Products a/k/a Sky Billiards, Inc. (“Sky Billiards” or “Defendant”) imports, markets, and sells “a variety of household items, including outdoor fireplaces, through its own website and through online marketplaces such as Amazon, eBay, Rakuten, Newegg, and Sears.” (ECF No. 1 ¶ 15; ECF No. 16 ¶ 15; see ECF No. 32 at 1.) Prior to filing the instant lawsuit, Plaintiffs learned that Defendant was advertising and selling a fireplace product, known as the “Best Choice Products BCP Hex Shaped Outdoor Home Garden Backyard Fireplace” (“BCP Fireplace”), through online retailers, including Amazon, at a price of $71.95. (ECF No. 1 ¶ 20; ECF No. 1-2; ECF No. 32 at 1.) Defendant purchased and imported this product from a Chinese factory named Foshan Yuelong Metal (“Foshan”). (ECF No. 32 at 1.) Defendant's BCP Fireplaces were shipped to customers with an owner's manual which included the BLUE RHINO mark, as well as language stating that the product's warranty was provided by Blue Rhino. (ECF No. 1 ¶¶ 21-23; ECF No. 32 at 2; see ECF No. 11 ¶ 4.) The owner's manual also provided Blue Rhino's website and phone number. (ECF No. 1 ¶ 22; ECF No. 32 at 2; see ECF No. 11 ¶ 4.)

         Shortly after filing the instant lawsuit, Plaintiffs also filed a Motion for Temporary Restraining Order and Preliminary Injunction (“TRO Motion”), (ECF No. 3). Plaintiffs withdrew their TRO Motion based on Defendant's representations that, among other things, it: (i) “ceased displaying, distributing, shipping and/or selling products accompanied by [an] owner's manual referencing Ferrellgas's BLUE RHINO mark and Blue Rhino's name, website address, or telephone number;” (ii) would “not display, distribute, copy, prepare derivative works based upon, ship and/or sell its current owner's manual or any other owner's manual or other materials that reference Ferrellgas's BLUE RHINO mark or Blue Rhino's name, website address, or telephone number;” and (iii) would “immediately send a letter to inform all of its customers who have already purchased Sky Billiards, Inc.'s Hex Fireplace product . . . that the product they purchased from Sky Billiards did not originate from [Plaintiffs] and that such customers should not contact [Plaintiffs] for product assembly, registration, replacement parts, returns, or warranty claims, and that [Plaintiffs] have no obligation to provide service or assistance with [the same].” (ECF No. 11 ¶¶ 4-6; ECF No. 12; see ECF No. 32 at 2.)

         On June 21, 2016, the Court entered an Order Approving Joint Rule 26(f) Report (“Scheduling Order”). (ECF No. 21.) Among other things, the Order set a discovery deadline of December 21, 2016, as well as deadlines for service of each party's Rule 26 initial disclosures. (See id.; ECF No. 20 at 2.) Plaintiffs' initial disclosures were due no later than “[t]hree months prior to the close of discovery, ” and Defendant's initial disclosures were due no later than “[t]wo months prior to the close of discovery.” (ECF No. 20 at 2; see ECF No. 21.) Plaintiffs served their Rule 26 Initial Disclosures on June 22, 2016. (ECF No. 27-2 at 9-13.) Defendant failed to serve any Rule 26 initial disclosures. Plaintiffs also served their First Set of Requests for Production of Documents and Things and its First Set of Requests for Admission on July 13, 2016 and September 13, 2016, respectively. (Id. at 15-51.) Plaintiffs' discovery requests were served via U.S. Mail, addressed to the Winston Salem, North Carolina office of Kenneth Otis, Defendant's counsel. (ECF No. 27-2 at 30; 51.) Defendant failed to serve responses to any of Plaintiffs' discovery requests, or to serve any discovery requests of its own. Plaintiffs subsequently filed their Motion for Summary Judgment on December 9, 2016, (ECF No. 27), followed by a Motion for Sanctions on January 7, 2017, (ECF No. 29). Defendant then, on January 8, 2017, filed a Motion to Amend its responses to Plaintiffs' First Set of Requests for Admissions. (ECF No. 31.) Because the admissions at issue are integral to the resolution of the Motion for Summary Judgment, the Court will first address Defendant's Motion to Amend.

         II. DISCUSSION

         A. Defendant's Motion for Leave to Amend Defendant's Responses to Plaintiffs' First Set of Requests for Admissions

         Under Rule 36, the parties to litigation may request admissions from their adversaries “regarding purely factual matters or the application of law to facts, but not matters of law.” Adventis, Inc. v. Consol. Prop. Holdings, Inc., 124 F. App'x 169, 172 (4th Cir. 2005) (unpublished); see Fed. R. Civ. P. 36(a). “The purpose of such admissions is to narrow the array of issues before the court, and thus expedite both the discovery process and the resolution of the litigation.” Adventis, 124 F. App'x at 172. “A matter admitted under this rule is conclusively established. . . .” Fed.R.Civ.P. 36(b); see Adventis, 129 F. App'x at 173 (“[O]nce a matter that is properly [the] subject of an admission under Rule 36(b) has been admitted during discovery, the district court is not free to disregard that admission.”). “This conclusive effect applies equally to those admissions made affirmatively and those established by default, even if the matters admitted relate to material facts that defeat a party's claim.” Am. Auto. Ass'n (Inc.) v. AAA Legal Clinic of Jefferson Crooke, P.C., 930 F.2d 1117, 1120-21 (5th Cir. 1991) (footnotes omitted).

         The Fourth Circuit has long held that unanswered requests for admissions are deemed admitted. See Batson v. Porter, 154 F.2d 566, 568 (4th Cir. 1946). A court may, however, permit withdrawal or amendment of admissions only if: (i) the withdrawal or amendment would promote the presentation of the merits of the action; and (ii) the court is not persuaded that it would prejudice the party that has obtained the admissions. Fed.R.Civ.P. 36(b). The Court must consider these two factors when determining whether to allow a party's untimely response to requests for admissions. See Bailey v. Christian Broad. Network, 483 F. App'x 808, 810 (4th Cir. 2012) (unpublished per curiam decision) (concluding that a district court's “failure to consider the Rule 36(b) factors in ruling on a motion to file RFAs out of time constitutes an abuse of discretion”).

         1. Presentation of the merits of the action

         As to the first Rule 36(b) factor, Defendant argues that “allowing Sky [Billiards] to amend [its] responses will have significant effect on the Court's ability to adjudicate this matter on the merits.” (ECF No. 31-1 at 4.) Plaintiffs argue in response that allowing Defendant to amend its responses will “actually [have] no effect as Defendant does not have any evidence to offer . . . [because] Defendant failed to make its initial disclosures, ” and likewise, Defendant failed to produce any documents or information during discovery. (ECF No. 34 at 16.) The Court agrees with Plaintiffs.

         It is undisputed that Defendant failed to provide the mandatory Rule 26 initial disclosures in accordance with the Court's Scheduling Order. See Fed. R. Civ. P. 26 advisory committee's notes to 1993 amendment (explaining that initial disclosures are “the functional equivalent of court-ordered interrogatories”). “The purpose of Rule 26(a) is to allow the parties to adequately prepare their cases for trial and to avoid unfair surprise.” Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396 (4th Cir. 2014). Where a party has failed to make the disclosures required under Rule 26(a), Rule 37(c) dictates that “the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed.R.Civ.P. 37(c)(1). In determining whether a party's failure to make the required disclosures was substantially justified or harmless, the Court considers the following factors: “(1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the non-disclosing party's explanation for its failure to disclose the evidence.” S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir. 2003). Defendant bears the burden of establishing that its omission was justified or harmless, see Id. at 596, yet Defendant has made no showing or argument that its failure was, in fact, substantially justified or harmless. The first four factors, which address the issue of harmlessness, tend to weigh against Defendant primarily because, at this stage in the litigation, with the discovery deadline having long-since passed, Plaintiffs are foreclosed from an opportunity to test any witnesses or evidence that Defendants may, at this late date, attempt to introduce in this case. Moreover, given that Defendant has offered no explanation whatsoever for its failure to provide the required initial disclosures of evidence, the fifth factor, which addresses whether the failure was substantially justified, likewise weighs against Defendant. Accordingly, the Court finds that the Defendant's failure to make the required disclosures was neither harmless nor substantially justified, and Defendant is, therefore, precluded from using any such information or witness to provide evidence at trial or in support of its motions.

         In addition to its failure to provide mandatory initial disclosures, Defendant also failed to participate in discovery at all during the allotted discovery period. Thus, because Defendant will have no admissible evidence to substantiate its claims and/or defenses, a presentation of this case on the merits is not an option. See J&J Sports Prods., Inc. v. Mumford, No. DKC 10-2967, 2012 WL 1409588, at *3 (D. Md. Apr. 20, 2012).

         2. Prejudice to the opposing party

         As to the second Rule 36(b) factor - whether there is prejudice to the party relying on the admissions - courts weigh “the difficulty the party opposing the motion to withdraw will face as a result of the sudden need to obtain evidence to prove the matter it had previously relied upon as answered.” Id. at *4 (quotation omitted); see also Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 154 (6th Cir. 1997) (“[Prejudice] is not simply that the party who initially obtained the admission will now have to convince the fact finder of its truth. Prejudice under Rule 36(b), rather, relates to special difficulties a party may face caused by a sudden need to obtain evidence upon withdrawal or amendment of an admission” (quotation and citation omitted)). As Defendant argues, a party's reliance on a deemed admission in preparing a summary judgment motion does not, without more, constitute prejudice to justify denial of a motion to withdraw or amend the admissions. (ECF No. 31-1 at 4-5.) However, “[w]ith the passage of time and as each moment for response . . . slipped by, [Defendant's] burden for withdrawal of the deemed admissions is raised and the prejudice to [Plaintiffs] is increased.” In re Fisherman's Wharf Fillet, Inc., 83 F.Supp.2d 651, 661 (E.D. Va. 1999).

         To evaluate whether the party that relied on the admissions will suffer prejudice, courts consider a number of factors including, among others: (i) the number of months/length of time after the deadline to respond to requests for admissions; (ii) the timing of the motion for withdrawal or amendment of admissions in relation to the discovery deadline; (iii) whether the relying party had forgone discovery based on the deemed admissions; (iv) the moving party's responsiveness, or lack thereof, to discovery requests or communications; and (v) whether the moving party received notice from the relying party or the court of the consequences of failing to respond to discovery requests. See Precision Franchising, LLC v. Gatej, No. 1:12cv158 (JCC/TCB), 2012 WL 6161223, at *7 (E.D. Va. Dec. 11, 2012) (citing cases). Plaintiffs contend that because “[e]ach of these factors are present here, ” they will be prejudiced if Defendant is allowed to amend its responses. (ECF No. 34 at 17.) Defendant contends that Plaintiffs “still [have] ample time to prepare its case based on Sky's Amended Responses and will not be prejudiced at trial.” (ECF No. 31-1 at 5.) The Court agrees with Plaintiffs.

         Here, Plaintiffs' Requests for Admissions were served on September 13, 2016, (ECF No. 27-2 at 32, 51), with Defendant's responses due 30 days later, on October 13, 2016. Defendant contends that it failed to respond to Plaintiffs' Requests for Admissions (as well as Plaintiffs' document requests) because “neither of [Sky Billiards'] attorneys received or were aware that discovery had been served until well after the response date had past [sic].” (ECF No. 31-1 at 2-3.) Defendant further states that its local counsel, Kenneth Otis, (to whom the Requests were sent) “has no history of issues or disruptions with receiving U.S. mail at his office, ” and the Certificate of Service on Plaintiffs' Requests “correctly reflected” Mr. Otis' office address. (Id. at 3.) Nonetheless, Defendant states that it learned of the written discovery, through its counsel, who “discovered the Motion for Summary Judgment and the accompany[ing] exhibits [on] the Court's electronic docket.”[2] (ECF No. 31-3 ¶ 7; ECF No. 31-4 ¶ 5.)

         The Court notes that its Case Management/Electronic Case Files (“CM/ECF”) docket reflects that electronic notice of the filing of Plaintiffs' Motion for Summary Judgment was sent to all counsel, including Mr. Welch and Mr. Otis, on December 9, 2017. Even assuming that this was, in fact, Defendant's first notice of outstanding, unanswered discovery requests served by Plaintiffs, Defendant made no efforts to contact Plaintiffs for an extension of time to respond to the Requests for Admissions and/or an extension of the discovery deadline (which, at that time, had not yet expired). Nor did Defendant promptly move the Court at that time for leave to amend its responses to the Requests for Admissions. Rather, Defendant waited until January 8, 2017, 30 days after notice was provided via CM/ECF of the outstanding, unanswered Requests for Admissions, before filing the instant Motion to Amend. (See ECF No. 31.) In addition, the trial of this matter is scheduled for October 2, 2017, (see ECF No. 26), and, because of Defendant's failure to respond to Plaintiffs' discovery requests and its failure to serve any discovery requests of its own, no other meaningful discovery has occurred during the discovery period. Thus, if the Court were to allow Defendant's Motion to Amend, with the discovery period now closed, Plaintiffs, having reasonably relied on the deemed admissions in determining how to proceed with discovery and summary judgment, will be prejudiced in that they will be unable to engage in any discovery related to the matters which are the subject of the admissions. See J & J Sports Prods., Inc., 2012 WL 1409588, at *4 (stating that when a party foregoes discovery and reasonably relies “upon default admissions and then uses those admissions as a basis for summary judgment, withdrawal of the admissions may be prejudicial”); BB&T Co. v. Deutz-Allis Corp., 120 F.R.D. 655, 659 (E.D. N.C. 1988) (finding that plaintiff would be prejudiced if defendants were allowed to withdraw admissions thereby interjecting new and significant issues upon which no discovery had been undertaken).

         Even assuming arguendo that, as Defendant contends, its attorneys did not receive Plaintiffs' discovery and were not aware that discovery had been served until after the response deadline, the Court cannot ignore the nature of Defendant's participation in this litigation, or lack thereof, [3] prior to the close of discovery which has been minimal, at best, and, perhaps, even dilatory. This, coupled with the ...


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