Crocs, Inc. v. Effervescent, Inc et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Philip A. Brimmer
Civil Action No. 06-cv-00605-PAB-KMT
(Consolidated with Civil Action No. 16-cv-02004-PAB-KMT)
Civil Action No. 06-cv-00605-PAB-KMT
CROCS, INC.,
Plaintiff,
v.
EFFERVESCENT, INC.,
HOLEY SOLES HOLDINGS, LTD.,
DOUBLE DIAMOND DISTRIBUTION, LTD., and
U.S.A. DAWGS, INC.,
Defendants.
Civil Action No. 16-cv-02004-PAB-KMT
U.S.A. DAWGS, INC. and
DOUBLE DIAMOND DISTRIBUTION, LTD.,
Plaintiffs,
v.
RONALD SNYDER,
DANIEL HART,
THOMAS J. SMACH,
ANDREW REES,
GREGG RIBATT,
ANDREW REDDYHOFF,
GEORGE B. BOEDECKER, JR.,
LYNDON HANSON,
DONALD LOCOCO,
RAYMOND CROGHAN,
RONALD FRASCH,
MICHAEL MARGOLIS,
JEFFREY LASHER,
MICHAEL E. MARKS,
PRAKASH MELWANI,
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JOHN P. MCCARVEL,
ERIK REBICH, and
SARA HOVERSTOCK,
Defendants.
ORDER
This matter is before the Court on the Out-of-State Defendants’ Motion for
Reconsideration of Denial of Rule 12(b)(2) Dismissal [Docket No. 847] and defendant
Andrew Reddyhoff’s Motion to Dismiss and Joinder in Out-of-State Defendants’ Motion
for Reconsideration of Denial of Rule 12(b)(2) Dismissal [Docket No. 848]. The out-of-
state defendants1 request that the Court reconsider its September 25, 2017 order,
Docket No. 673 (the “September 25 Order”), denying their motion to dismiss for lack of
personal jurisdiction, Case No. 16-cv-02004, Docket No. 31. Docket No. 847 at 1.
I. BACKGROUND
This fourteen-year dispute involves infringement and non-infringement claims
related to three patents concerning variations of shoes made by Crocs, Inc. (“Crocs”).
The background facts and procedural history are set out in the magistrate judge’s
recommendation, as well as in the September 25 Order, and will not be repeated
unless necessary for purposes of this order.
1 These defendants are Raymond Croghan, Ronald Frasch, Prakash Melwani,
Michael Marks, Thomas Smach, Andrew Rees, and Gregg Ribatt. The Court will refer
to these seven defendants and Andrew Reddyhoff together as the “out-of-state
defendants” because Mr. Reddyhoff “adopts and joins the arguments” that the
defendants set forth in Docket No. 847. See Docket No. 848 at 2. Mr. Reddyhoff
followed the same practice in the first round of briefing for this motion before the case
was administratively closed. See, e.g., Docket Nos. 738 (motion), 778 (reply).
2
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Crocs filed Case No. 06-cv-00605-PAB-KMT on April 3, 2006, alleging, inter alia,
infringement of United States Patent Nos. 6,993,858 and D 517,789. Docket No. 1
(“the 2016 lawsuit”). On August 5, 2016, U.S.A. Dawgs, Inc. and Double Diamond
Distribution Ltd. (individually and/or collectively, with Mojave Desert Holdings, LLC,
referred herein as “Dawgs”) filed its complaint in Case No. 16-cv-02004-PAB-KMT (“the
2016 lawsuit”). Case No. 16-cv-02004, Docket No. 1.2 The 2016 lawsuit ultimately
named 18 individual defendants (the “individual defendants”), all of whom were current
or former employees, officers, or directors of Crocs. Id. at 10–19, ¶¶ 9–14. Dawgs, a
Crocs competitor, claimed that, as a result of Crocs’s conduct in marketing the exact
same shoe that was already in existence using invalid and unenforceable patents, id. at
38, ¶¶ 55–56, Crocs had secured its own success, obtained a market share for “molded
clog-type footwear” in excess of 90%, and negatively impacted Dawgs. Id. at 43–46,
¶¶ 68–74. According to Dawgs, the individual defendants “directed, participated in,
sanctioned, ratified, or acquiesced” in the decision to sue Dawgs and to continue the
2006 lawsuit through the present. Id. at 10–18, ¶¶ 9–13. As such, Dawgs brought
seven claims against the individual defendants, discussed more fully in the September
25 Order and below. Id. at 61–107, ¶¶ 150–262.
In response to Dawgs’s complaint, the individual defendants filed a motion to
dismiss all claims in the 2016 lawsuit. Case No. 16-cv-02004, Docket No. 31.3 Seven
2 The two lawsuits were consolidated on January 27, 2017. See Case No. 06-cv-
00605, Docket No. 426; Case No. 16-cv-02004, Docket No. 66.
3 That motion was filed on behalf of the 15 original defendants served in the
2016 action (Daniel Hart, Thomas Smach, Andrew Rees, Gregg Ribatt, Lyndon “Duke”
Hanson, Donald Lococo, Raymond Croghan, Ronald Frasch, Michael Margolis, Jeffrey
3
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of these defendants, the out-of-state defendants, also moved to dismiss for lack of
personal jurisdiction. Id. at 24.4 The out-of-state defendants argued that “nearly half of
the [d]efendants . . . reside outside of Colorado” and that Dawgs failed to allege that
“each out-of-state [d]efendant has sufficient contacts with Colorado in this suit.” Id.
Rather, the out-of-state defendants insisted that Dawgs “[a]lleg[ed] an affiliation with an
in-state corporation,” which “does not save Dawgs’ claims against these [d]efendants.”
Id. (citing Encore Prods., Inc. v. Promise Keepers, 53 F. Supp. 2d 1101, 1107 (D. Colo.
1999)). Nor, the out-of-state defendants maintained, “can an individual be subject to
personal jurisdiction solely on acts undertaken in his or her corporate capacity.” Id. at
25. (citing Club Car, Inc. v. Club Car (Quebec) Import, Inc., 362 F.3d 775, 784 (11th Cir.
2004)); see also Grober v. Mako Prod., Inc., 686 F.3d 1335, 1347 (Fed. Cir. 2012).
Dawgs argued that there were sufficient contacts with the forum state by virtue of the
out-of-state defendants’ participation in “sham patent litigation, intentional interference,
and false advertising.” Case No. 16-cv-02004, Docket No. 38 at 25.
The Court denied the motion to dismiss for lack of personal jurisdiction. Docket
No. 673 at 10. The Court further noted that personal jurisdiction comports with due
process when the defendant has “minimum contacts with the forum state and where
those contacts are such that jurisdiction does not of fend ‘traditional notions of fair play
Lasher, Michael Marks, Prakash Melwani, John McCarvel, Erik Rebich and Sara
Hoverstock). Docket No. 31 at 1 n.1. Mr. Reddyhoff did not join this motion because
he had not been served before the cases were consolidated and then administratively
closed.
4 These defendants are Mr. Croghan, Mr. Frasch, Mr. Melwani, Mr. Marks, Mr.
Smach, Mr. Rees, and Mr. Ribatt. Id. at 24 n.15.
4
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and substantial justice.’” Id. at 11 (quoting Interstate Restoration, LLC v. Wilson
Assocs., No. 13-cv-03423-REB-MJW, 2014 WL 1395466, at *2 (D. Colo. Apr. 8, 2014)
(quoting Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945))). The Court found that,
while the complaint alleged that the individual defendants interfered with Dawgs’s
business opportunities and violated the Lanham Act, the complaint did not allege that
these activities were purposefully directed at the forum state. Id. at 12–13 (citing Allison
v. Wise, 621 F. Supp. 2d 1114, 1120 (D. Colo. 2007) (f inding no personal jurisdiction
where out-of-state conduct was not “expressly aimed” at the forum state, despite
causing injuries in the forum state). Therefore, the “only relevant conduct directed at
the forum state” was the “out-of-state defendants’ alleged authorization of this lawsuit.”
Id. at 13. The Court determined that this was sufficient to satisfy the minimum contacts
requirement because “the act of authorizing and directing a lawsuit [may] be enough to
establish jurisdiction over officers of a corporation.” Id. (quoting Rusakiewicz v. Lowe,
556 F.3d 1095, 1101 (10th Cir. 2009)). Further, the Court noted, “it m ust be true that
those who support and authorize funding of intentional tortious conduct must be subject
to personal jurisdiction in the state where the tort took place and where they committed
the acts that supported the tort.” Id. (quoting Rusakiewicz, 556 F.3d at 1101). Because
“[i]t is scarcely unfair to make those who have initiated a lawsuit in a particular state
undergo suit in that state to determine whether the lawsuit was tortious,” id. (quoting
Rusakiewicz, 556 F.3d at 1102), the Court found that exercising personal jurisdiction
did not offend “traditional notions of fair play and substantial justice.” Id. quoting (Asahi
Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 113 (1987)).
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The out-of-state defendants sought reconsideration of the Court’s order in
October 2017. Docket No. 704. Dawgs responded. Docket No. 744. Dawgs then filed
for Chapter 11 bankruptcy, however, and the Court administratively closed the cases on
March 19, 2018. Docket No. 821 at 4. After the matter was reopened on July 14, 2020,
Docket No. 842, the Court permitted the parties to re-file their motions and responses,
Docket No. 845, and the out-of-state defendants re-filed their request that the Court
reconsider its order denying the motion to dismiss for lack of personal jurisdiction.
Docket No. 847. Dawgs responded in opposition on September 4, 2020. Docket No.
857. The out-of-state defendants replied on September 11, 2020. Docket No. 861. As
noted above, Mr. Reddyhoff joins the out-of-state defendants’ briefing. See Docket
Nos. 848, 862.
II. LEGAL STANDARD
The Federal Rules of Civil Procedure do not specifically provide for motions for
reconsideration. See Hatfield v. Bd. of Cnty. Comm’rs for Converse Cty., 52 F.3d 858,
861 (10th Cir. 1995). Instead, motions for reconsideration fall within a court’s plenary
power to revisit and amend interlocutory orders as justice requires. See Paramount
Pictures Corp. v. Thompson Theatres, Inc., 621 F.2d 1088, 1090 (10th Cir. 1980) (citing
Fed. R. Civ. P. 54(b)); see also Houston Fearless Corp. v. Teter, 313 F.2d 91, 92 (10th
Cir. 1962). Regardless of the analysis applied, the basic assessment tends to be the
same: courts consider whether new evidence or legal authority has emerged or whether
the prior ruling was clearly in error. Motions to reconsider are generally an
inappropriate vehicle to advance “new arguments, or supporting facts which were
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available at the time of the original motion.” Servants of the Paraclete v. Does, 204
F.3d 1005, 1012 (10th Cir. 2000). “[A] motion for reconsideration is appropriate where
the court has misapprehended the facts, a party’s position, or the controlling law.”
Alpenglow Botanicals, LLC v. United States, 894 F.3d 1187, 1203 (10th Cir. 2018).
Under the clearly erroneous standard, “the reviewing court [must] affirm unless it ‘on the
entire evidence is left with the definite and firm conviction that a mistake has been
committed.’” Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir. 1988)
(citing United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).
III. ANALYSIS
The out-of-state defendants do not argue that new evidence or legal authority
has emerged that would call into question the soundness of the September 25 Order.
See Docket No. 847. Thus, the Court considers whether the September 25 Order
misapprehended the controlling law or whether the Court committed a mistake
warranting reconsideration. See Alpenglow, 894 F.3d at 1203; Ocelot Oil, 847 F.2d at
1464.
The out-of-state defendants argue that, though the Court found that there was “a
sufficiently pleaded basis” for personal jurisdiction over the defendants by virtue of
plaintiff’s “sham litigation claim,” the Court dismissed the sham litigation claim and
therefore has no basis to exercise personal jurisdiction over them. Id. at 2. That is,
because personal jurisdiction is analyzed “on a claim-by-claim basis,” the “dismissal of
[the only] claims for which there is jurisdiction eliminates the basis for personal
jurisdiction” for other claims. Id. (citing United States v. Botefuhr, 309 F.3d 1263 (10th
7
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Cir. 2002)). To allow Dawgs to proceed based on claim for which there is no
jurisdiction, because the claim was dismissed, the out-of-state defendants argue, would
“impose an unreasonable burden” on them. Id.
The out-of-state defendants argue that the dismissal of the claim that provides
personal jurisdiction “means that the theory of pendant [sic] personal jurisdiction cannot
support maintaining personal jurisdiction over claims for which there is no independent
basis for specific jurisdiction.” Id. at 5–6. That is because the basis for exercising
pendent jurisdiction “no longer applies.” Docket No. 861 at 1. Pendent jurisdiction, the
out-of-state defendants argue, only applies to a claim that “arises out of the ‘same
nucleus of operative fact’ as the jurisdictionally proper ‘anchor’ claim.” Docket No. 847
at 9 (quoting Botefuhr, 309 F.3d at 1272–73). Here, the out-of -state defendants argue
that the sham litigation claim – the only claim for which the Court found personal
jurisdiction over the out-of-state defendants – did not arise out of the same nucleus of
operative fact as the Lanham Act false advertising claim. Id. at 10. Rather, the sham
litigation theory alleges that the defendants “caused Crocs to assert patent rights
against Dawgs” by filing the Crocs case in Colorado. Id. This claim concerns the
“propriety of Crocs’s assertion of intellectual property rights against Dawgs’s footwear,
as well as Crocs’s conduct” before the United States Patent and Trademark Office. Id.
The Lanham Act allegations, however, concern “allegedly inaccurate statements to the
public about the foam materials in its Crocs’s footwear.” Id. While both claims relate
to Crocs, the out-of-state defendants do not believe this is enough for pendent
jurisdiction. Id. at 11 n.4.
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Dawgs opposes reconsideration. First, Dawgs argues that the out-of-state
defendants are not entitled to reconsideration because the out-of-state defendants
never addressed pendent jurisdiction in their original brief and “spent only one
paragraph in their opening brief and one paragraph in reply even discussing personal
jurisdiction.” Docket No. 857 at 2. Second, Dawgs argues that the Court was correct in
determining that it “can and should” exercise personal jurisdiction over the out-of-state
defendants for Dawgs’s Lanham Act claims because the out-of-state defendants should
reasonably anticipate “being subject to the jurisdiction of the Colorado courts as a result
of holding office or being a director in a Colorado corporation.” Id. (quoting Pub.
Warranty Corp. v. Mullins, 757 P.2d 1140, 1141 (Colo. App. 1988)). T he out-of-state
defendants authorized Crocs to file a lawsuit in Colorado and to continue the case in
Colorado, Dawgs argues, directing Crocs to avail itself of the Colorado courts. Id. 2–3.
Additionally, the out-of-state defendants, who are Crocs executives, attended board of
directors meetings in Colorado, where they “created or continued the dissemination of
false claims that Croslite was patented.” Id. at 3. As such, Dawgs argues, reliance on
non-director or non-officer cases, like Botefuhr, is misplaced. Id. at 8.
The Court agrees with the out-of-state defendants that the September 25 Order
was in error. As the out-of-state defendants explain, once the Court determined that
the dismissed sham litigation claim was the only claim for which there was personal
jurisdiction, the Court then should have determined that it could only exercise pendent
personal jurisdiction over the out-of-state defendants if there were another live claim.
When the Court dismissed all other claims but the Lanham Act claim, it erred in finding
personal jurisdiction.
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The out-of-state defendants are correct that the rule in Botefuhr and its progeny
controls this issue. In Botefuhr, an Oklahoma resident gifted shares of stock to her
niece and two nephews, two of whom were Texas residents. 309 F.3d at 1268–69.
However, the recipients failed to comply with gift tax laws and the estate did not comply
with estate tax laws. Id. at 1268. The Internal Revenue Service (“IRS”) brought three
claims against the recipients, two for individual liability for the gift tax violations and one
for representative liability for the estate tax liability. Id. at 1269. The IRS later
abandoned the representative liability claim. Id. The Tenth Circuit held that the district
court erred in exercising jurisdiction over the individual liability claims. Id. at 1271.
First, the court held that the Texas recipients receiving gifts from an Oklahoma resident
was insufficient to confer personal jurisdiction. Id. at 1272. Then, the court held that
the district court erred in exercising pendent jurisdiction for the individual liability claims
based on the dismissed representative liability claim. Id. at 1274.
The court explained that pendent personal jurisdiction exists when “a court
possesses personal jurisdiction over a defendant for one claim, lacks an independent
basis for personal jurisdiction over the defendant for another claim that arises out of the
same nucleus of operative fact, and then, because it possesses personal jurisdiction
over the first claim, asserts personal jurisdiction over the second claim.” Id. at 1272.
The claim that serves as the basis for personal jurisdiction is called the “anchor” claim.
Id. at 1274. This “piggyback[ing]” on the anchor claim only works, however, “provided
that all the claims arise from the same facts as the claim over which [the court] has
proper jurisdiction.” Id. at 1272. But if the anchor claim is dismissed and there is no
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other claim before the district court that could serve as a basis for personal jurisdiction
over the defendants, the district court “abuse[s] its discretion by retaining jurisdiction”
over another claim. Id. at 1274.
The out-of-state defendants are correct that the sham litigation claim – which
served as the anchor claim – did not arise from “the same facts” as the Lanham Act
claim. The sham litigation theory concerned allegations that the out-of-state defendants
authorized and directed Crocs to assert baseless patent claims for the benefit of
Colorado-based Crocs. See Case No. 16-cv-02004, Docket No. 38 at 24–25. The
Lanham Act claim, on the other hand, is that Crocs and the individual defendants,
including the out-of-state defendants, “have been misleading the public and consumers
by claiming that Crocs footwear is made of an exclusive and proprietary closed-cell
resin [Crocs] call[s] ‘Croslite.’” Case No. 16-cv-02004, Docket No. 1 at 105–06, ¶ 256.
The Lanham Act claim, therefore, is that Crocs has misled consumers into believing
that Crocs uses a material different than its competitors and that Crocs owns the rights
to such material. Id. at 106, ¶ 257. Thus, because the anchor claim did not arise from
the same facts as the “piggyback[ed]” claim, see Botefuhr, 309 F.3d at 1272, it was
error for the Court to assert pendent jurisdiction over the Lanham Act claim. Even
though a claim that a defendant directed and authorized sham litigation is sufficient to
confer personal jurisdiction, see Rusakiewicz v. Lowe, 556 F.3d 1095, 1101–02 (10th
Cir. 2009), such a claim can only anchor pendent jurisdiction if it is a live claim in the
lawsuit. Here, however, because the Court has dismissed the sham litigation claim,
reliance on Rusakiewicz and similar cases is misplaced.
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Moreover, as Botefuhr explains, even if the two claims arose from the same
nucleus of operative facts, see 309 F.3d at 1272–73, it would be an abuse of discretion
for the Court to retain jurisdiction over the Lanham Act claim after the Court dismissed
the sham litigation claim because, once the anchor claim “disappeared, there was no
claim before the [] [C]ourt for which it could” exercise jurisdiction. See id. at 1274. The
Court therefore will grant the out-of-state defendants’ motion to dismiss.
IV. CONCLUSION
For these reasons, it is
ORDERED that Out-of-State Defendants’ Motion for Reconsideration of Denial
of Rule 12(b)(2) Dismissal [Docket No. 847] is GRANTED. It is further
ORDERED that all claims against Raymond Croghan, Ronald Frasch, Prakash
Melwani, Michael Marks, Thomas Smach, Andrew Rees, and Gregg Ribatt are
DISMISSED without prejudice. It is further
ORDERED that defendant Andrew Reddyhoff’s Motion to Dismiss and Joinder in
Out-of-State Defendants’ Motion for Reconsideration of Denial of Rule 12(b)(2)
Dismissal [Docket No. 848] is GRANTED. It is further
ORDERED that all claims against Andrew Reddyhoff are DISMISSED without
prejudice.
DATED March 11, 2021.
BY THE COURT:
____________________________
PHILIP A. BRIMMER
Chief United States District Judge
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