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U.S.A. Dawgs, Inc. v. Crocs, Inc.

United States District Court, D. Nevada

August 2, 2017

U.S.A. DAWGS, INC., et al., Plaintiff(s),
v.
CROCS, INC., Defendant(s).

          ORDER

         Presently before the court is defendant Crocs, Inc.'s (“Crocs”) motion for sanctions. (ECF No. 29). Plaintiffs Double Diamond Distribution, Ltd. (“DDD”) and U.S.A. Dawgs, Inc. (“Dawgs”) filed a response (ECF No. 38), to which defendant replied (ECF No. 39).

         Previously before the court was defendant Crocs' motion to dismiss.[1] (ECF No. 6). Notably, plaintiffs filed a response (ECF No. 12) and discovery plan (ECF No. 17). Thereafter, plaintiffs filed separate notices of voluntary dismissal without prejudice. (ECF Nos. 22, 27).

         I. Facts

         Crocs and Dawgs have been in an ongoing legal battle in the Colorado courts since 2006. (ECF No. 29 at 3). Crocs filed its Colorado suit in 2006, and the action was generally stayed from 2006 to 2012. (Id.). During a brief reopening in 2012, Crocs named a Dawgs' entity “as a defendant and Dawgs asserted counterclaims” against Crocs.[2] (Id.). The parties agreed to stay that suit again in 2012. (Id.).

         In 2014, Dawgs “filed an antitrust action against Crocs in the District of Nevada” before Judge Boulware. U.S.A. Dawgs, Inc. v. Crocs, Inc., No. 2:14-CV-01461-RFB-PAL, 2015 WL 5765966, at *2 (D. Nev. Sept. 30, 2015); (ECF No. 12 at 5). That Nevada court transferred that action to Colorado because the antitrust claims “substantial[ly] overlap[ped]” with existing patent claims in the first filed Colorado action, supporting transfer under the Kohn factors. U.S.A. Dawgs, 2015 WL 5765966, at *2; see also Kohn Law Group, Inc. v. Auto Parts Mfg. Mississippi, Inc., 787 F.3d 1237, 1241 (9th Cir. 2015).

         In early 2016, the Colorado court granted Dawgs' motion to reopen that suit. (ECF No. 29 at 4).

         On June 10, 2016, with its Colorado suit pending, Crocs filed suit against CVS Health Corporation (“CVS”) in the United States District Court for the Southern District of Florida.[3](ECF No. 40-1 at 2). The Florida complaint alleged that CVS sold footwear that infringed on the U.S. Patent No. D 632, 465 (the “'465 patent”). (ECF No. 38 at 4). It was the first reference to the '465 patent in any of the relevant Colorado, Florida, or Nevada cases. (Id.).

         “On June 28, 2016, Crocs filed its motion for leave to file its second amended complaint [in Colorado], the effect of which would be to add an additional claim against Dawgs for infringement of the '465 patent.” (ECF No. 40-1 at 3).

         Following Crocs' motion to amend in Colorado, Dawgs filed a declaratory judgment action with this court on July 18, 2016. (ECF No. 29 at 2). In this Nevada action, Dawgs asked the court to adjudicate the “(1) validity of the '465 patent, and (2) whether Dawgs' shoes infringe the '465 patent.” (Id. at 4). Dawgs purportedly filed the suit in Nevada to avoid the “substantial hardship” of litigating in another district.[4] (Id.).

         On August 2, 2016, in Colorado, Crocs argued in its reply in support of its motion for leave to amend that Dawgs' Nevada filing was anticipatory and improper, but both suits remained open. (Id. at 5).

         Thereafter, Crocs filed its motion to dismiss the instant action on September 2, 2016. (Id.). Crocs' Nevada motion to dismiss also asserted that the underlying suit was anticipatory and improper. (ECF No. 6).

         Three days before filing its response to the Nevada motion to dismiss, Dawgs' attorney sent an email to Crocs proposing that the parties agree to transfer the suit to Colorado. (ECF No. 12-2 at 2). Dawgs' counsel suggested it wished to transfer this Nevada suit to Colorado and proposed that Crocs agree to request specific judges in Colorado. (Id.). Crocs did not respond because Dawgs' offer would have purportedly forced Crocs to “forfeit its right to litigate the '465 patent alongside its other patents.” (ECF No. 16 at 7). On September 16, 2016, Dawgs filed a response to Crocs' Nevada motion to dismiss. (ECF No. 12).

         On October 6, 2016, a Colorado magistrate judge recommended denying Crocs' motion to amend, reasoning that granting the motion might prejudice Dawgs in its pending motion for declaratory judgment filed in Nevada. See (ECF No. 40-1 at 4).

         Dawgs submitted a proposed discovery plan for the Nevada suit on October 17, 2016, and Crocs filed a motion to stay a week later. (ECF Nos. 17, 18). However, on November 7, 2016, Dawgs filed a notice of voluntary dismissal for the underlying suit. (ECF No. 22 at 1). Dawgs sought to intervene in the Florida case, which forced it to dismiss the Nevada suit for declaratory judgment. (ECF No. 38 at 4-5).[5] This court closed the underlying suit on December 6, 2016. (ECF No. 27).

         Also in November 2016, Dawgs withdrew its opposition to Crocs' Colorado motion to amend that complaint. (ECF No. 38 at 4). On January 27, 2017, that court issued an order granting Crocs' motion for leave to file a second amended complaint to include the ‘465 patent, reasoning that circumstances had changed in light of the Nevada dismissal. (ECF No. 40-1 at 5).

         On December 20, 2016, defendant Crocs filed the present motion for sanctions under either 28 U.S.C. § 1927 or the court's inherent powers, alleging that plaintiffs Dawgs and DDD filed the instant declaratory judgment action in bad faith. (ECF No. 29).

         Crocs asserts the action was anticipatory and “vexatiously” multiplied court proceedings. (Id. at 10). Crocs requests $12, 219.01 in attorneys' fees and $750.00 in pro hac vice filing fees. (ECF No. 29-1).

         II. Legal Standards and Discussion

         A. Sanction for attorneys' fees

         1. Legal standard under 28 U.S.C. § 1927

Under Section 1927:
Any attorney or other person admitted to conduct cases in any court of the United States . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and ...

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