United States District Court, D. South Dakota, Western Division
CHEVAL INTERNATIONAL and AUGUST K. ANDERSON, Plaintiffs,
SMARTPAK EQUINE, LLC, Defendant.
MEMORANDUM OPINION AND ORDER ON MOTION FOR SUMMARY JUDGMENT
LAWRENCE L. PIERSOL UNITED STATES DISTRICT JUDGE
Plaintiffs, Cheval International and August Anderson, have sued Defendant, Smartpak Equine, LLC for: (1) Trademark Infringement under 15 U.S.C. § 1114; (2) Unfair Competition; (3) False Description under 15 U.S.C. § 1125; and (4) Defamation, Deceptive Trade Practices, Tortious Interference with Business Expectancy, Unfair Competition and Trademark Infringement under South Dakota law.
Defendant has moved for summary judgment on all of Plaintiffs' claims.
Plaintiff, August Anderson, developed horse supplements including those commonly known as "Black-As-Knight", "Gold-As-Sun", "Red-D-Vinity", and "Inside-Out". "Inside-Out" is a feed supplement that acts as a natural insect repellant. It is marketed as making a horse smell and taste bad to biting insects. Plaintiffs allege that it quickly became known as "Bug-Off. The other three supplements are marketed to improve the look and health of horse coats. Anderson is the owner and manager of Cheval International, a limited partnership created under the laws of South Dakota. Cheval develops, manufactures and sells the equine supplements.
Smartpak is in the same industry as Plaintiffs in that both sell animal and equine supplements. In 1999, Smartpak began purchasing supplements from Plaintiffs and repackaging them into single dose packages for resale. In approximately 2009, Smartpak began manufacturing and selling a product that it named "Smart Bug-Off, meant to repel biting insects by the taste and smell of horses that eat the "Smart Bug-Off supplement.
Plaintiffs ended their business relationship with Smartpak in June of 2012, but allowed Smarkpak to continue selling their products until Smartpak's supply was exhausted. Smartpak stopped selling the products once it exhausted its supply.
Since 1992, Plaintiffs have used the names "Black-As-Knighf, "Gold-As-Sun", "Inside-Out" and "Bug-Off as marks for the purposes of identifying their goods and distinguishing them from other manufacturers. "Red-D-Vinity" was first used in 2004. The "Black-As-Knight" and "Gold-As-Sun" marks were registered on July 23, 2013.
Smartpak's "SmartBug-Off mark was registered on December 8, 2009.
Background Relating to Dispute
Plaintiffs' claims against Smartpak arise from Internet searches of Plaintiffs' marks. After Plaintiffs severed their business relationship with Smartpak, Anderson discovered that Internet searches for "Black-As-Knight", "Gold-As-Sun", and "Red-D-Vinity" resulted in some links that would refer to Smartpak's website and state that the products are no longer available. SmartPak's website would states things such as "black as knight" is no longer available at SmartPak, or, "Sorry, we couldn't find what you were looking for." Anderson claims she has been contacted on multiple occasions by consumers who thought Plaintiffs were out of business or no longer selling these products.
In December of 2012, Anderson asked Smartpak to stop making statements on its website and in advertisements on the Internet that Plaintiffs' products were no longer available. Anderson's concerns were set forth in emails to Paal Gisholt at SmartPak. The following is an excerpt from one of those emails, dated December 18, 2012:
Here is my huge concern - my number one selling product I googled to day: Black As Knight. It appeared that you were the manufacturers of BlackAsKnight. Nontheless, I click on it and I go straight to the page of your's and blackenalls "knockoff' and in red it says "Black As Knight is no longer available, but don't worry you can buy our....
No wonder I've been getting calls from panicking customers asking if we went out of business!
Although Smartpak indicated that it would stop saying the products are no longer available, the company allegedly continued to cause search engine results for Plaintiffs' major products to state that they were no longer available. Dissatisfied with SmartPak's response, Plaintiffs instituted the present lawsuit in by filing the Summons and Complaint on February 24, 2014. Plaintiffs' theory is:
SmartPak's unauthorized use of Plaintiffs' trademarks has caused and continues to cause actual confusion in the market by luring customers of Plaintiffs' products to SmartPak's website where it informs potential customers that the Plaintiffs' products are no longer available and offers a replacement product.
SmartPak's unauthorized use of Plaintiffs' trademarks is diverting internet traffic to SmartPak's commercial website, thereby capitalizing on Plaintiffs' goodwill. The diversion of internet traffic has resulted in the loss of customers to Plaintiff, because once consumers arrive at SmartPak's website, consumers are encouraged to purchase SmartPak's products. Consumers are not given the opportunity to purchase Plaintiffs' products which were used to lure the consumers to SmartPak's website because SmartPak no longer sells those products or wrongfully asserts that the product is no longer available.
(Doc. 31, ¶¶ 21 and 22.) Plaintiffs claim they have lost sales from consumers who, because they believed Plaintiffs were no longer selling the products or that Cheval was no longer in business, purchased similar products from other providers, including SmartPak. (Id. at ¶ 29.)
After receiving an extension of time to file an Answer, on April 18, 2014 SmartPak filed a motion to dismiss Plaintiffs' claims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Doc. 10.) Plaintiffs objected to SmartPak's motion to dismiss and did not respond to the merits of the motion. (Docs. 17, 18, and 21.) Among other objections, Plaintiffs urged the Court not to take judicial notice of SmartPak's exhibits 3 and 5 through 18 when considering SmartPak's motion to dismiss. In response to these motions, Judge Viken entered an Order on February 25, 2015, converting SmartPak's Motion to Dismiss to a motion for summary judgment under Federal Rule of Civil Procedure 56(a). (Doc. 26.) SmartPak filed its Statement of Undisputed Material Facts on March 19, 2015. (Doc. 27.) On April 9, 2015, Plaintiffs, represented by counsel, filed responses to Smartpak's motion and statement of facts. Although Plaintiffs' lawyers addressed the merits of SmartPak's motion in a responsive brief, they noted that Plaintiffs should be allowed to conduct discovery prior to summary judgment. (Doc. 32 at 4.) At the same time, Plaintiffs filed a motion for a continuance and postponement of the summary judgment decision pursuant to Federal Rule of Civil Procedure 56(d). (Doc. 28.) Plaintiffs' counsel asserted that they could not "present facts sufficient to justify their opposition to what is now SmartPak's motion for summary judgment." (Doc. 29 ¶ 3.) Plaintiffs explained that they expected discovery to uncover the following facts and information:
a. SmartPak's extensive use of Plaintiffs' trademarks (Black-As-Knight, Gold-As-Sun, Red-D-Vinity, Inside-Out, and Bug-Off) in print and digital advertisements, on SmartPak's website, inmetatags, and in all other forms. Plaintiffs have only sporadically been able to capture instances of infringement by SmartPak. Plaintiffs believe this infringement and deliberate course of unfair competition extends far beyond what Plaintiffs have been able to capture.
b. SmartPak's continued advertisement and use of Plaintiffs' trademarks even after SmartPak stated that it would cease to use Plaintiffs' trademarks in its advertisements and search engine advertisements.
c. SmartPak's statements on its website as to Plaintiffs' products no longer being available.
d. Evidence of actual confusion of customers regarding Plaintiffs' products and SmartPak's products.
e. Evidence of the diversion of internet traffic to SmartPak's website through the use of Plaintiffs' trademarks. Based on information and belief, SmartPak has records of the internet traffic to its webpages and can track the number of consumers that visited each particular webpage. Further, based on information and belief, SmartPak has records of the results of its internet advertising campaigns, such as Google AdWords.
f. SmartPak's tactics in converting those consumers that visit SmartPak's website looking for Plaintiffs' products to customers of SmartPak.
g. Evidence of SmartPak's intentional and willful use of Plaintiffs' trademarks to divert traffic to SmartPak's website.
h. Evidence of SmartPak's knowledge of Plaintiffs' trademarks and deliberate use of Plaintiffs' trademarks and confusingly similar names for SmartPak's own products.
i. Evidence of SmartPak's false and misleading statements and representations of fact regarding Plaintiffs sale of Plaintiffs' products.
j. Evidence regarding the use of "Bug-Off " as the name commonly used to refer to Plaintiffs' insect repellant product.
k. Other evidence related to the claims set forth in Plaintiffs' Complaint.
(Doc. 29 at ¶ 5.) The Court ordered the parties to engage in discovery on the matters framed by SmartPak's motion. (Doc. 37.) The scheduling Order included an October 30, 2015 deadline for discovery on the motion for summary judgment. (Id.)
Subsequently, the relationship between Plaintiffs and their lawyers deteriorated. Two motions were filed requesting withdrawal as counsel for Plaintiffs. (Docs. 38 and 43.) On her own, Anderson served multiple sets of discovery requests. SmartPak moved for a protective order and sanctions against Anderson, arguing that she violated the Court's discovery Order and that almost all of the discovery requests were irrelevant. (Docs. 41, 42.) On August 7, 2015, Anderson agreed to withdraw her discovery requests (doc. 46-1), stating that "an infinite amount of time could be wasted arguing whether each and every one of these is within the scope of Summary Judgement Motion and, in the end, not a drop of new information will be provided to Plaintiffs by Defendant." (Doc. 46-1.) On August 10, 2015, SmartPak withdrew its motion for protective order and sanctions. (Doc. 46).
Thereafter, on August 11, 2015, Anderson and lawyers for SmartPak filed a joint motion, stipulating to the following:
1. Plaintiffs withdraw their motion for a continuance of SmartPak's motion to dismiss, which was converted to a motion for summary judgment. Dkt. No. 28. Plaintiffs agree that they do not seek any discovery from any person, including SmartPak, before the Court can consider and decide SmartPak's summary judgment motion. The Court's Scheduling Order, Dkt. No. 37, should be vacated.
2. The parties agree that, if the Court approves this Stipulation, SmartPak shall file and serve any reply to Plaintiffs' response in opposition to the summary judgment motion, within 21 days of the Court's Order.
3. The parties agree that Cheval International shall engage new attorneys and enter their appearance on behalf of that partnership, within 30 days of the Court's Order ...