Zest IP Holdings, LLC et al v. Implant Direct MFG. LLC et al

Filing 572

ORDER Denying 566 Implant Direct Sybron International and Implant Direct Sybron Manufacturing, LLC's Motion for Certification of Orders For Interlocutory Appeal. The Court Vacates the hearing date set for this matter on January 9, 2015 at 1:30 p.m. Signed by Judge Gonzalo P. Curiel on 1/7/2015. (srm)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ZEST IP HOLDINGS, LLC, et al.,
Plaintiffs,

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v.

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IMPLANT DIRECT MFG., LLC, et
al.,
Defendants.

CASE NO. 10cv541-GPC(WVG)
ORDER:
(1) DENYING IMPLANT DIRECT
SYBRON INTERNATIONAL AND
IMPLANT DIRECT SYBRON
MANUFACTURING, LLC’S
MOTION FOR CERTIFICATION OF
ORDERS FOR INTERLOCUTORY
APPEAL;
[Dkt. No. 566.]
(2) VACATING HEARING DATE

INTRODUCTION
Presently before the Court is a motion for certification of orders for

20 interlocutory appeal by Defendants Implant Direct Sybron International and Implant
21 Direct Sybron Manufacturing, LLC (collectively, “IDSI”). (Dkt. No. 566.) The
22 Parties have fully briefed the motion. (Dkt. Nos. 569-70.) The Court finds the
23 motion suitable for disposition without oral argument pursuant to Civil Local Rule
24 7.1(d)(1). Upon review of the moving papers and subsequent briefing, and the
25 applicable law, the Court DENIES IDSI’s motion for certification.
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BACKGROUND
As set forth in prior orders in this case, this is a patent and trademark

28 infringement action involving dental attachment products. (See Dkt. No. 1.) The
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[10cv541-GPC(WVG)]

1 procedural history in this four-and-a-half year old litigation is long and complex.
2 I.

Case Initiation

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On March 12, 2010, Plaintiffs Zest Anchors, LLC and Zest Holdings, LLC

4 (collectively, “Zest”) filed the initial Complaint in the present action, naming
5 Defendants Implant Direct International, Implant Direct LLC, and Implant Direct
6 MFG, LLC (collectively, “Implant Direct”). (Dkt. No. 1.) On August 27, 2010,
7 Zest filed a First Amended Complaint (“FAC”), the current operative Complaint.
8 (Dkt. No. 13.) The gravamen of the FAC is that Implant Direct manufactures, offers
9 for sale, and sells the “GoDirect” dental attachment product and the GoDirect
10 Prosthetic System (“GPS”) (collectively, “Accused Products”) in violation of Zest’s
11 patents, and falsely and unfairly uses the ZEST® and LOCATOR® trademarks when
12 marketing the Accused Products. (See Dkt. No. 13 ¶¶ 6, 7, 20, 21, 24-28, 30-32.)
13 The FAC alleges eight causes of action against the Implant Direct Defendants:
14 (1) Infringement of U.S. Patent No. 6,030,219; (2) Infringement of Patent No.
15 6,299,447; (3) Trademark Infringement; (4) False Designation of Origin; (5) False
16 Advertising; (6) California UCL; (7) California statutory False Advertising; and
17 (8) Common Law Unfair Competition. (Id.) On September 17, 2010, Implant
18 Direct filed an Answer to Plaintiffs’ First Amended Complaint. (Dkt. No. 17.)
19 II.

Creation of IDSI Entities

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Under the terms of a transaction agreement dated November 17, 2010

21 (“Transaction Agreement”), Implant Direct entered into a corporate transaction
22 (“2010 Transaction”) with Sybron Canada Holdings, Inc. for an “arms-length” sale
23 whereby the Implant Direct entities formed and transferred 100% of their interests
24 into wholly-owned subsidiaries, which were then purchased by Sybron Canada
25 Holdings, Inc. (“Sybron”). (See Dkt. No. 521, Velez Decl. Ex. 1.) In particular,
26 Implant Direct Mfg. LLC became Implant Direct Sybron Manufacturing, LLC and
27 Implant Direct International became Implant Direct Sybron International LLC. (See
28 Dkt. No. 146 at 4; Dkt. No. 521-2, Velez Decl. Ex. 3, Chang Depo. at 69:20-70:4.)
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Pursuant to the Transaction Agreement, the IDSI entities assumed “the

2 following liabilities of Sellers solely to the extent relating to the ID Business: . . .
3 (iii) . . . all Liabilities arising out of the ownership, use or operation by the Joint
4 Venture Companies of the ID Contributed Assets following the Closing, and
5 (iv) numbers 1, 2, 3, 5, and 6 on the litigation summary attached to Section 2.16 of
6 the Sellers’ Disclosure Schedule . . .” (Dkt. No. 521, Velez Decl. Ex. 1 at
7 § 9.1(qq).) The referenced “litigation summary” lists nine items under the heading
8 “A summary of all pending or threatened litigation or action against the Company.”
9 (Dkt. No. 521-1, Velez Decl. Ex. 2, Litigation Summary.) The litigation summary
10 discloses the present litigation as item two, stating that:
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Zest Anchors filed a Complaint alleging that Implant Direct’s GoDirect
one-piece implant infringes its patent. GoDirect implants account for
about 0.2% of Implant Direct’s implant sales, and Implant Direct has filed
for a Patent on this product. . . Implant Direct anticipates litigation with
Zest when Implant Direct launches its new GPS abutment system, for
which Implant Direct has also filed a patent application. Implant Direct
believes that it does not infringe the Zest patent, and also that it is
protected from claims of inducing infringement because the Zest cap
attachment works with the Implant Direct GPS Abutment. Zest served
the Complaint on July 7, 2010 and filed an Amended Complaint on
August 27, 2010.

17 (Id. at 3) (emphases in original).
18 III.

Joinder of the IDSI Entities

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Following a series of discovery disputes between the Parties, Zest filed a

20 motion to formally join the IDSI entities to the present action as
21 successors-in-interest to the Implant Direct entities pursuant to Federal Rules of
22 Civil Procedure 25(c). (Dkt. No. 116.) The motion was filed on August 21, 2012,
23 and was fully briefed, including supplemental briefing. (Dkt. Nos. 146, 156, 170,
24 177.) On October 22, 2012, the case was transferred from Judge Larry Burns to the
25 undersigned Judge. (Dkt. No. 142.) Following a hearing on January 4, 2013, (Dkt.
26 No. 184, Hearing Transcr.), this Court denied Zest’s motion to join the IDSI entities
27 on the ground that Zest had not properly served IDSI with the motion. (Dkt. No.
28 185.) The Court further granted Zest fifteen days to properly effectuate service and
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1 took the motion under submission. (Dkt. No. 185.) On February 19, 2013, the IDSI
2 entities filed an opposition to Zest’s motion to join. (Dkt. No. 190.) On February
3 21, 2013, Zest filed a reply to the IDSI opposition. (Dkt. No. 191.) On April 15,
4 2013, this Court issued an order granting Zest’s motion to join the IDSI entities as
5 successors-in-interest to Implant Direct. (Dkt. No. 202.) In particular, this Court
6 found that the benefits of joinder outweighed Zest’s delay in seeking joinder and
7 that IDSI was not unduly prejudiced because “IDSI has had an opportunity as an
8 interested party to influence the direction that Implant Direct has sought in the
9 litigation up to this point.” (Id. at 4-6.)
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On May 6, 2013, without seeking leave to do so, the IDSI entities filed an

11 Answer to Zest’s Amended Complaint, asserting a counterclaim against Zest for
12 patent invalidity. (Dkt. No. 211.) On May 31, 2013, Zest filed a motion to strike
13 IDSI’s Answer and Counterclaim arguing that IDSI was attempting to file the very
14 same Answer and Counterclaim that Implant Direct was previously disallowed by
15 Judge Larry Burns to file, (see Dkt. No. 81), and that IDSI, as a successor-in-interest
16 to Implant Direct, was not entitled to start the case anew under Rule 25(c). (Dkt.
17 Nos. 226, 226-1.) IDSI opposed the motion, (Dkt. No. 253), and Plaintiffs replied,
18 (Dkt. No. 261). On October 16, 2013, this Court granted Zest’s motion to strike
19 IDSI’s answer and counterclaim. (Dkt No. 301 at 4-10.)
20 IV.

November 4, 2014 Order

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More than six months later, on April 28, 2014, new counsel filed a notice of

22 appearance and applied to appear pro hac vice for the IDSI entities. (Dkt. Nos. 419,
23 421, 422.) On April 29, 2014, IDSI filed a “Motion for Clarification of Joinder and
24 Discovery Orders,” moving this Court to clarify that the Court’s order joining IDSI
25 to the present action as successor-in-interest to IDSI is limited to Implant Direct’s
26 conduct prior to the 2010 Transaction. (Dkt. No. 420.) On July 30, 2014, the Court
27 declined to decide the scope of IDSI liability on a “motion for clarification” without
28 the proper legal and evidentiary showings. (Dkt. No. 455 at 5-6.)
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The Parties then filed three cross-motions for summary judgment on the

2 question of whether IDSI’s joinder to this litigation under Federal Rules of Civil
3 Procedure 25(c) is solely for Implant Direct’s pre-2010 Transaction conduct or
4 whether IDSI’s potential liability is severed as of the date of the 2010 Transaction.
5 (Dkt. Nos. 456, 467-68.) In essence, the Parties sought to determine the scope of
6 the Implant Direct and IDSI Defendants’ potential liability for the present litigation
7 due to the transfer of interest between them in the 2010 Transaction. The Parties
8 fully briefed all three motions. (Dkt. Nos. 489-91, 498-500.) A hearing was held on
9 October 3, 2014. (Dkt. No. 532.).
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On November 4, 2014, the Court: (1) denied IDSI’s motion for summary

11 judgment; (2) granted in part and denied in part Zest’s motion for summary
12 judgment; and (3) granted in part and denied in part Implant Direct’s motion for
13 partial summary judgment. (Dkt. No. 558.) The Court concluded that the IDSI
14 entities are liable for their own post-2010 Transaction conduct and are bound to the
15 Court’s prior orders and Implant Direct’s litigation decisions. The Court rejected
16 IDSI’s arguments that Rule 25(c) limited their liability to the conduct of their
17 predecessors, the Implant Direct entities, and that it violated due process to hold
18 IDSI liable for their own conduct without allowing ISDI to answer, raise defenses,
19 engage in discovery, or present independent witnesses.
20 V.

November 19, 2014 Order

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On November 10, 2014, IDSI filed a motion for leave to file an answer. (Dkt.

22 No. 559.) On November 19, 2014, the Court held a teleconference, with all parties
23 appearing telephonically by counsel, to address the timing and propriety of IDSI’s
24 motion. (Dkt. No. 564.) The same day, the Court issued an order construing IDSI’s
25 motion to file an answer as a motion for reconsideration of the Court’s November 4,
26 2014 Order, and denying that motion for lack of legal cause to reconsider. (Dkt.
27 No. 565.)
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1 VI.

Present Motion

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On December 1, 2014, IDSI filed the present motion for certification for

3 interlocutory appeal of the Court’s November 4 and 19, 2014 Orders (“Court’s
4 Orders”). (Dkt. No. 566.) IDSI contends that the Court’s Orders raise two
5 controlling questions of law:
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“1. When a transferee successor-in-interest is joined to a pending

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lawsuit pursuant to Fed. R. Civ. P. 25(c), is the successor’s liability

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limited to its predecessor’s conduct, or may the district court permit the

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successor to be sued for damages for its own independent post-transfer

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conduct, when the plaintiff has not filed an amended complaint that

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sets forth claims against the successor?

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2. If a joined successor-in-interest may be sued for damages for its

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own post-transfer conduct, do the Federal Rules of Civil Procedure and

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due process permit the district court to bar it from filing an answer and

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asserting defenses, even where plaintiff asserts new claims against the

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successor that were not set forth in the pre-transfer complaint against

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the predecessor and were not addressed by an answer the predecessor

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filed before the successor existed?”

19 (Id. at 2; Dkt. No. 566-1 at 8.) If the Court grants the motion, IDSI further moves to
20 stay proceedings pending leave to appeal to the United States Court of Appeals to
21 the Federal Circuit. (Dkt. No. 566 at 2; Dkt. No. 566-1 at 9.)
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On December 15, 2014, Zest opposed the motion. (Dtk. No. 569.) On

23 December 19, 2014, IDSI replied. (Dkt. No. 570.)
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LEGAL STANDARD
District courts may certify an issue for interlocutory appeal upon satisfaction

26 of certain criteria. 28 U.S.C. § 1292(b). Those criteria are: (1) the order involves a
27 controlling question of law; (2) there is substantial ground for difference of opinion;
28 and (3) an immediate appeal from the order may materially advance the ultimate
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1 termination of the litigation. Id.; In re Cement Antitrust Litig., 673 F.2d 1020, 1026
2 (9th Cir. 1982). Courts apply section 1292(b)’s requirements strictly, and grant
3 motions for certification only when exceptional circumstances warrant immediate
4 appeal. Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978); see also Fujitsu
5 Ltd. v. Tellabs, Inc., 539 Fed. App’x 1005, 1006 (Fed. Cir. 2013) (per curiam)
6 (“Both the legislative history of Section 1292(b) and the case law emphasize that
7 appellate courts should only grant interlocutory appeals under rare circumstances.”).
8 The party seeking certification to appeal an interlocutory order has the burden of
9 establishing the existence of such exceptional circumstances. Coopers & Lybrand,
10 437 U.S. at 475. “Even then, a court has substantial discretion in deciding whether
11 to grant a party’s motion for certification.” Zulewski v. Hershey Co., No. CV 1112 5117 KAW, 2013 WL 1334159, at *1 (N.D. Cal. Mar. 29, 2013).
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DISCUSSION
Having considered the foregoing criteria, the Court finds that no exceptional

15 circumstances warrant interlocutory review. The Court concludes that, even
16 assuming the Court’s Orders involve a “controlling question of law,” they do not
17 involve a question as to which there is “a substantial ground for difference of
18 opinion.” 28 U.S.C. § 1292(b).
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“To determine if a ‘substantial ground for difference of opinion’ exists under

20 § 1292(b), courts must examine to what extent the controlling law is unclear.”
21 Couch v. Telescope, Inc., 611 F.3d 629, 633 (9th Cir. 2010). “Courts traditionally
22 will find that a substantial ground for difference of opinion exists where ‘the circuits
23 are in dispute on the question and the court of appeals of the circuit has not spoken
24 on the point, if complicated questions arise under foreign law, or if novel and
25 difficult questions of first impression are presented.’” Id. (citation omitted).
26 “However, ‘just because a court is the first to rule on a particular question or just
27 because counsel contends that one precedent rather than another is controlling does
28 not mean there is such a substantial difference of opinion as will support an
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1 interlocutory appeal.’” Id. (citation omitted).
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Here, IDSI’s argument to show a “substantial ground for difference of

3 opinion” focuses on the same cases which the Court previously considered and
4 rejected. The Court found these cases distinguishable, and noted that “IDSI has
5 pointed to no cases in which a court severed liability at the time of transfer for a
6 successor-in-interest to a case under Rule 25(c).” (Dkt. No. 558 at 14.) On the
7 other hand, the Court noted that “Zest’s cited authorities demonstrate that several
8 courts have brought successors-in-interest into a case and have allowed post9 transfer conduct to be included in the calculation of damages.” (Id. at 15.) IDSI
10 contends that the Court’s Orders violate the Supreme Court’s holding regarding due
11 process rights in Nelson v. Adams USA, Inc., 529 U.S. 460 (2000). (Dkt. No. 566-1
12 at 6.) However, the Court found that “the due process concerns raised by Nelson are
13 not applicable to this case.” (Dkt. No. 558 at 16.) ISDI’s strong disagreement with
14 the Court regarding these questions is insufficient to establish a substantial ground
15 for difference of opinion. See Couch, 611 F.3d at 633.
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Moreover, IDSI has not shown that it is likely that an appeal will “materially

17 advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b). An
18 interlocutory appeal should be certified only when doing so “would avoid protracted
19 and expensive litigation.” In re Cement, 673 F.2d at 1026. If, by contrast, an
20 interlocutory appeal would delay resolution of the litigation, it should not be
21 certified. See Shurance v. Planning Control Int’l, Inc., 839 F.2d 1347, 1348 (9th
22 Cir. 1988). Here, resolution of the issues on which IDSI’s seeks appeal would not
23 terminate the case because the pre-transfer claims would remain. See, e.g., S.E.C. v.
24 Sells, No. C 11-4941 CW, 2012 WL 4897385, at *2 (N.D. Cal. Oct. 15, 2012). In
25 addition, an interlocutory appeal would only further delay a case that has been
26 pending for over four-and-a-half years.
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As Defendants have not met the second and third criteria required by

28 § 1292(b), the Court finds that there are no exceptional circumstances warranting
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1 interlocutory review. Accordingly, the Court DENIES IDSI’s motion for
2 certification of orders for interlocutory appeal.
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CONCLUSION AND ORDER

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For the foregoing reasons, the Court:

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1.

DENIES Implant Direct Sybron International and Implant Direct

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Sybron Manufacturing LLC’s Motion for Certification of Orders for

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Interlocutory Appeal, (Dkt. No. 566);

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the Court hereby VACATES the hearing date set for this matter on
January 9, 2015 at 1:30 p.m.

IT IS SO ORDERED.

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12 DATED: January 7, 2015
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HON. GONZALO P. CURIEL
United States District Judge

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