United States District Court, D. Colorado
PREDATOR INTERNATIONAL, INC., a Colorado corporation, Plaintiff,
GAMO OUTDOOR USA, INC., a Florida corporation, Defendant.
PHILIP A. BRIMMER, District Judge.
This matter is before the Court on Defendants' Motion for Sanctions Pursuant to Fed.R.Civ.P. 11 and 28 U.S.C. § 1927 [Docket No. 266] filed by defendant Gamo Outdoor USA, Inc. and former defendant Industrias El Gamo S.A. (collectively, "Gamo"). Gamo moves the Court to award sanctions under Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927 against plaintiff Predator International, Inc. ("Predator") and its counsel (1) for seeking to reassert its patent infringement claim [Docket No. 227] after voluntarily dismissing that claim [Docket Nos. 113, 142] and refiling it in state court and (2) for seeking to assert a patent ownership claim also being litigated in state court. Docket No. 266 at 2-3.
The following facts are undisputed unless otherwise indicated. In its original complaint [Docket No. 1], its first amended complaint [Docket No. 4], its second amended complaint [Docket No. 73], and its third amended complaint, filed on March 3, 2010, Predator asserted a claim for infringement of United States Patent No. 6, 526, 893 (the "893 Patent"). Docket No. 117 at 8. Predator alleged that it was the lawful assignee of the 893 Patent. Id. at 3, ¶ 15. On March 4, 2010, Predator moved to dismiss its patent infringement claim without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(2). Docket No. 113 at 1. In moving to dismiss, Predator stated that, when the current owners acquired Predator in 2007, they believed that Lee T. Phillips, one of the co-inventors of the 893 Patent, had assigned his interest in the patent to Predator when he stepped down as Vice President in 2002, but that "Mr. Phillips now asserts that he still owns 50% of the 893 Patent." Docket No. 113 at 2. Predator further stated that:
Predator vehemently disagrees that Mr. Phillips has any rights to the 893 Patent based on applicable Colorado law regarding fiduciary duty, constructive trust, and contract reformation, and that he is, in fact, obligated to provide Predator with a written assignment evidencing that ownership. Nonetheless, in recognition of the fact that standing is a threshold issue in every action, Predator recognizes that it must resolve this ownership dispute with Mr. Phillips, obtain a formal patent assignment from him, or re-file with Mr. Phillips as a co-plaintiff, to cure the potential defect in standing. Rather than bring Mr. Phillips into this case and plead ancillary state law claims regarding ownership, resulting in a time-consuming and complicated side-show over only one of multiple claims made in this case, Predator plans to proceed with litigation in Colorado state court against Mr. Phillips. Predator certainly hopes that this ownership dispute can be resolved swiftly so that it may re-file its patent infringement claim as soon as possible.
Docket No. 113 at 3. Gamo did not object to dismissal of the claim, but did request that dismissal be conditioned on an award of fees and costs expended in defending against the claim. Docket No. 149 at 7.
On May 14, 2010, while its March 4, 2010 motion to dismiss was still pending, Predator moved to file a fourth amended complaint, excluding the patent infringement claim. Docket No. 142. It stated that "Predator seeks to voluntarily dismiss its patent infringement claims against both Defendants because it has discovered that it cannot prove that it had standing to pursue these claims without a written assignment from Mr. Lee Phillips, a co-inventor of the 893 Patent." Id. at 2. Gamo did not oppose Predator's request to amend its complaint, but maintained that a grant of leave to amend should be conditioned on an award of fees and costs. Docket No. 149 at 7.
On September 9, 2010, the magistrate judge granted Predator's motion to file a fourth amended complaint. Docket No. 160. The magistrate judge denied Gamo's request for fees and costs on the basis that certain discovery expenses were avoidable and that the discovery related to the patent infringement claim would prove useful in litigating Gamo's counterclaims and the patent infringement claim should Predator re-file it at a future date. Id. at 14-16.
On April 7, 2010, Predator brought an action in the District Court for the County of Chaffee, Colorado against Mr. Phillips seeking, inter alia, a declaratory judgment regarding ownership of the 893 Patent. Docket No. 266 at 4; Docket No. 268 at 8, ¶ 9. In June 2010, Mr. Phillips assigned his interest in the 893 Patent to Gamo. Docket No. 268 at 8, ¶ 10(b); Docket No. 272 at 6. On July 15, 2010, Gamo recorded its assignment of Mr. Phillips' interest with the United States Patent and Trademark Office. Docket No. 272-2.
Gamo states that it informed Predator's counsel, Jeffrey Thennisch, of the assignment on July 14, 2010, and that the assignment was discussed in the course of settlement proceedings before the magistrate judge in early September 2010. Docket No. 272 at 6. Predator maintains that it did not learn of the assignment until September 27, 2010, Docket No. 268 at 9, ¶ 11, and that, had it known of the assignment earlier, it "likely would have dismissed the state court proceeding and the ownership claim would have been heard by this Court." Docket No. 268 at 27.
In November, 2010, Gamo filed a motion to intervene in the state court action, asserting six claims for relief against Predator. Docket No. 266 at 4; Docket No. 268 at 10, ¶ 13. The state court granted Gamo's request to intervene on January 1, 2011. Id. Mr. Phillips asserted eight counterclaims against Predator and multiple claims against his co-inventor, Thomas May, in a third-party complaint. Docket No. 268 at 10-11, ¶¶ 13-14. Predator moved to dismiss the counterclaims asserted by Gamo and by Mr. Phillips; on April 1, 2011, the state court denied Predator's motions to dismiss with respect to all claims, except Gamo's declaratory judgment claim. Docket No. 268 at 11, ¶ 15; id. at 22. On November 29, 2011, the state court granted a motion to disqualify Predator's attorney, John Cogswell, because it found he was a necessary witness in the case. Docket No. 266-2. On October 5, 2011, the state court denied Predator's motion to recuse Judge Barton. Docket No. 266-3. The order on the motion to recuse indicates that Predator was dissatisfied with a number of Judge Barton's previous rulings. See, e.g., Docket No. 266-3 at 3, ¶ 5 ("Plaintiff states Judge Barton has become GAMO's de facto attorney because he did not dismiss GAMO's fraud claims and allegedly allowed amendment of the claims.... the claim of bias or bent of mind appears to be based upon a difference of opinion. This difference of opinion can be raised on appeal but not as grounds to recuse the judge.").
The deadline to amend the pleadings in this case was October 15, 2009. Docket No. 59 at 7. The discovery cut-off date was February 1, 2011. Docket No. 174. On July 11, 2011, Predator moved for leave to file a supplemental complaint. Docket No. 227. Specifically, Predator requested leave under Federal Rule of Civil Procedure 15(d) to assert a claim for a declaratory judgment of patent ownership against Gamo. Id. at 2. Predator argued that this claim arose after the case was filed because, "[a]t the time Predator removed its patent infringement claim from this case, Phillips, not GAMO, was the person who claimed co-ownership in the patent." Docket No. 227 at 6. It further argued that litigating the declaratory judgment claim in this Court would "avoid the forum shopping undertaken by GAMO by its purchase of the Assignment and duplicative litigation will be avoided because this Court will likely act more quickly than the state court." Docket No. 227 at 8. In addition, Predator moved for leave under Rule 15(a)(2) to reassert its patent infringement claim. Id. Predator argued that, because the statute of limitations was running on its patent infringement claim, the Court should grant leave to file the claim and then stay resolution of the claim pending a determination on patent ownership. Id. at 14. On July 28, 2011, Gamo sent a letter to Predator's counsel requesting that Predator withdraw its motion for leave to supplement pursuant to Rule 11. Docket No. 266-1.
On September 19, 2011, the magistrate judge issued a recommendation (the "Recommendation") finding that Predator's motion for leave to supplement was untimely with respect to the declaratory judgment claim because the assignment to Gamo was executed in June 2010 and Predator did not provide any reason for its delay in seeking to assert the claim in this Court. Docket No. 239 at 18. The magistrate judge likewise found that Predator's motion was untimely with respect to its patent infringement claim because Predator did not establish good cause for amending the scheduling order nearly two years after the deadline for amending the pleadings had passed. Id. at 22. The magistrate judge found no evidence of a "recent event or change in circumstances [that] has endowed Predator with standing to pursue its patent infringement claim, or at least a colorable claim that it now has standing." Id. at 23. The magistrate judge further found that Predator's primary argument, that "Gamo USA's acquisition of whatever interests Phillips has in the patent as of June 2010 justifies amendment under Fed.R.Civ.P. 15(a), '" did not establish "an adequate explanation for delay." Id. In addition, the magistrate judge explained that the running of the statute of limitations is not sufficient to establish good cause under Rule 16(b)(4) for modifying a scheduling order because, "if anything, the fact that the statute of limitations is running would only draw scrutiny toward a delay in moving for leave to amend." Id. at 24.
On September 21, 2011, two days after the magistrate judge issued her Recommendation, Gamo served its motion for Rule 11 sanctions on Predator. Docket No. 266 at 2; Docket No. 268 at 2. On September 30, 2011, Predator filed an objection to the Recommendation, to which Gamo responded and Predator replied. Docket Nos. 241, 247, and 252. Predator objected to the Recommendation insofar as it denied the request to assert its declaratory judgment claim, but not with respect to the patent infringement claim. Docket No. 241 at 11-14, 21 ("Predator still has a fair amount of time and can file this claim in this Court at any time as a separate action.").
On March 26, 2012, the Court accepted the Recommendation on the basis that Predator failed to provide a legitimate explanation for its delay in filing its declaratory judgment claim. Docket No. 290 at 2-3 ("Plaintiff informs the Court that the delay in asserting the patent ownership claim stems from an April 1, 2011 state court ruling on defendants' fraud claims. Dissatisfied with that ruling, plaintiff decided to seek relief in this Court.... In short, the long delay is a consequence of seeking an alternate and more favorable forum to resolve that dispute. That fact provides no grounds to grant plaintiff's motion to file its second supplemental claim.").
On December 22, 2011, Gamo filed the instant motion for sanctions pursuant to Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927. Docket No. 266. Gamo seeks reasonable attorney's fees incurred in defending against Predator's July 2011 motion to supplement its complaint and ...