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Ninth Circuit:
Dismissal of Action Stemming From Failings of Counsel Improper
District Court Judge Found That Plaintiff Had Done Nothing to Prosecute Case
By a MetNews Staff Writer
The failings of a plaintiff’s lackadaisical lawyer did not justify a dismissal with prejudice of a trademark infringement lawsuit, the Ninth U.S. Circuit Court of Appeals declared yesterday, focusing on what the lawyer did wrong, while sidestepping the District Court’s finding that the plaintiff had utterly failed to prosecute its case.
A three-judge panel—comprised of Circuit Judges Bridget Shelton Bade and Richard A. Paez, joined by District Court Judge Jack Zouhary of the Northern District of Ohio, sitting by designation—reinstated an action by Luna Distributing, LLC, a Santa Ana company, against Stoli Group LLC USA, a New York-based partnership. Luna has pled that it has owned “the mark HAUTE® (pronounced ‘Hot’) for distilled spirits, including vodkas, since early 2009” and asserts that the “The Stoli Hot” vodka infringes on its mark.
District Court Judge David O. Carter, of the Northern District of California on April 25, 2019, ordered dismissal with prejudice of Lunas action under Rule 41(b) of the Federal Rules of Civil Procedure which provides:
“If the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it.”
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The Ninth U.S. Circuit Court of Appeals yesterday reinstated an action in which the plaintiff asserts that “Stoli Hot” vodka infringes on its trademark, “Haute.” A panel held that the action was wrongly dismissed based on failings of the plaintiff’s counsel. |
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District Court’s Decision
Carter observed:
“In this case, Plaintiff has demonstrated a pattern of failing to prosecute this case. Other than filing the complaint, Plaintiff has made no genuine effort to prosecute this action. Plaintiff has also repeatedly failed to comply this Court’s rules and orders and the Federal Rules of Civil Procedure. Specifically, Plaintiff has failed to timely appear before this Court at scheduled court conferences and has missed all of the deadlines in this case including the deadlines to oppose two dispositive motions namely, Defendant’s Motion to Dismiss and Defendant’s Motion for Summary Judgment and Dismissal.”
The jurist went through each of the five factors that must be considered in acting on a Rule 41(b) motion, as delineated in various Ninth Circuit cases:
“(1) the public’s interest in expeditious resolution of litigation; (2) the Court’s need to manage its docket; (3) the risk of prejudice to the defendants; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.”
Differing Views
Carter found that each of the factors was present. The Ninth Circuit agreed only to the extent that “[t]he first two factors favor dismissal,” noting that with attorney Craig Lytle “at the helm,” the plaintiff failed to respond to two motions, adding:
“Lytle also arrived three hours late to a scheduling conference, and missed a status conference. The district court correctly determined this conduct undercut both the interest in efficient litigation and the court’s need to manage its docket.”
It disagreed that the other factors existed.
Prejudice Presumed
Addressing the matter of prejudice to Stoli, Carter said:
“The Court presumes that a Defendant is prejudiced as a result of an unreasonable delay in prosecuting an action….Where a party offers a poor excuse for failing to comply with the Court’s rules and order and the Federal Rules of Civil Procedure, the prejudice to the opposing parties is sufficient to favor dismissal….Here, Plaintiff has offered no justification for its failure to comply with this Court’s orders and rules, meet the Court’s deadlines, conduct and respond to discovery, respond to dispositive motions and attend scheduled court conferences. Thus, the third factor also weighs in favor of dismissal.”
Contradicting Carter, the Ninth Circuit panel said:
“[H]ere, the conduct was not so egregious, or without remedy, that there was prejudice to Stoli. The Complaint was filed in September 2017 and dismissed with prejudice in April 2019. Not all delays were unreasonable or caused by Lytle.”
As to the public policy element, Carter wrote:
“Plaintiff has not discharged its responsibility to prosecute this action. Plaintiff has not even performed the bare minimum action necessary to oppose Defendant’s Motion for Summary Judgment and Dismissal, much less expended any time or effort to prosecute this case. Such behavior is in direct contradiction with the public’s interest in an expeditious resolution of litigation and the Court’s need to manage its docket.”
The three-judge panel said in yesterday’s opinion:
“The public policy favoring disposition on the merits almost always weighs against dismissal; this case is no exception.”
Less Drastic Alternatives
Carter reasoned that no action less severe than dismissal was suitable, setting forth:
“Given Plaintiffs egregious conduct and systematic failure to prosecute this action, failure to respond to discovery and comply with this Court’s deadlines, orders and procedures, no lesser sanction is likely be effective given Plaintiffs utter disregard for this Court and its rules and procedures. This Court has already granted Plaintiff multiple opportunities to cure its non-compliance and deficiencies in this action and to diligently prosecute this action going forward—all of which have been to no avail. Moreover, the Court attempted to avoid dismissal by ordering the parties to appear at a status conference, thereby, providing Plaintiff with one last opportunity to provide an explanation to the Court for its non-compliance and deficiencies. However, once again. Plaintiff demonstrated its disinterest in prosecuting this action and utter disregard for the authority of this Court by failing to appear at the scheduled status conference. Accordingly, dismissal is warranted.”
Bade, Paez and Zouhary said that Carter’s “frustration with Lytle is understandable,” but opined that “the harshness of the dispositive sanction, without a reasonable consideration of lesser alternatives—such as monetary sanctions against Luna’s counsel or requiring Luna to retain associate counsel—weighs heavily against dismissal with prejudice.”
Carter imposed discovery sanctions on Luna in the amount of $85,000. The panel affirmed, saying:
“Lima waived any argument that the size of the award is excessive or that its attorney, Lytle, is the more appropriate target for sanctions, because it did not assert these arguments before the district court or on appeal.”
The case is Luna Distributing LLC v. Stoli Group USA LLC, 19-55813.
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