Crocs, Inc. v. Cheng's Enterprises, Inc. et al

Filing 163

ORDER. ORDERED that Crocs' Motion to Enjoin and Prevent Violations of Stay by Dawgs and DDD; Request for Leave to File Motion for Sanctions 143 is DENIED and Crocs Administrative Motion to Reopen Case for Purpose of Hearing Crocs'sMotion to Enjoin and Prevent Violations of Stay by Dawgs and DDD; Request for Leave to File Motion for Sanctions 142 is DENIED as moot. Entered by Judge Philip A. Brimmer on 09/21/15.(jhawk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer

Civil Action No. 06-cv-00605-PAB-KMT
(Consolidated with Civil Action No. 12-cv-02096-PAB-KMT)

CROCS, INC.,
Plaintiff,
v.
CHENG’S ENTERPRISES, INC., et al.,
Defendants.

CROCS, INC.,
Plaintiff,
v.
CVS CAREMARK CORP., a Delaware corporation,
Defendant.
_____________________________________________________________________
ORDER
_____________________________________________________________________
This matter is before the Court on the Motion to Enjoin and Prevent Violations of
Stay by Dawgs and DDD; Request for Leave to File Motion for Sanctions [Docket No.
143] and the Administrative Motion to Reopen Case for Purpose of Hearing Crocs’s
Motion to Enjoin and Prevent Violations of Stay by Dawgs and DDD; Request for Leave
to File Motion for Sanctions [Docket No. 142] filed by Crocs, Inc. (“Crocs”).

I. BACKGROUND
On March 31, 2006, Crocs filed a complaint (the “ITC complaint”) against Double
Diamond Distribution, Ltd. (“DDD”) and other defendants in the present case with the
United States International Trade Commission (“ITC”). Docket No. 26 at 2, ¶ 3. Crocs
filed the ITC complaint alleging, among other things, that DDD unlawfully imported and
sold shoes bearing the trade name “Dawgs” infringing on two patents assigned to
Crocs: U.S. Patent No. 6,993,858 B2 (“’858 patent”) and U.S. Patent No. D 517,789
(“’789 patent”). Docket No. 26 at 2-3. On April 3, 2006, Crocs f iled this case against
DDD and other defendants alleging infringement of the ’858 and ’789 patents. Docket
No. 1 at 5, 7, ¶¶ 21, 24. On May 16, 2006, this case was administratively closed to
allow the case before the ITC to proceed pursuant to 28 U.S.C. § 1659. Docket No.
31.1 The proceeding before the ITC, including various appeals, lasted for
approximately six years. On October 1, 2011, the ITC ruled:
The Commission has determined that the appropriate form of relief is both:
(1) a general exclusion order prohibiting the unlicensed entry of foam
footwear that infringe one or more of (i) claims 1-2 of the ’858 patent, and (ii)
the claimed design of the ’789 patent; and (2) cease and desist orders
prohibiting Double Diamond, Effervescent, and Holey Soles from conducting
any of the following activities in the United States: importing, selling,
marketing, advertising, distributing, offering for sale, transferring (except for
exportation), and soliciting U.S. agents or distributors for, foam footwear that
infringe one or more of (i) claims 1 or 2 of the ’858 patent, and (ii) the
claimed design of the ’789 patent.
In the Matter of Certain Foam Footwear, USITC Inv. No. 337-TA-567, USITC Pub. No.
4260, 2011 WL 5997932, at *3 (Oct. 1, 2011).

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The case was periodically reopened to enter consent judgments against
defendants who settled with Crocs. See, e.g., Docket Nos. 42-43.
2

On May 9, 2012, the Court reopened the present case. Docket No. 75. On
August 3, 2012, DDD and U.S.A. Dawgs, Inc. (“Dawgs”) filed a request for inter partes
reexamination of the ’858 and ’789 patents with the United States Patent and
Trademark Office (“PTO”). Docket No. 118 at 1-2. On August 6, 2012, Crocs filed an
amended complaint, asserting claims against Cheng’s Enterprises, Inc., Effervescent,
Inc., Holey Soles Holdings, Ltd., DDD, and Dawgs for infringement of the ’858 and ’789
patents. Docket No. 104 at 8-9. On August 31, 2012, Dawgs filed an answer asserting
counterclaims against Crocs. Dawgs asserted counterclaims for declaratory judgment
of non-infringement, invalidity, and unenforceability of the ’858 and ’789 patents,
alleging, among other things, that Crocs engaged in inequitable conduct before the
PTO in the prosecution of the ’858 and ’789 patents. Docket No. 119 at 11-15. Daw gs
asserted counterclaims against Crocs for violations of the Sherman Act, 15 U.S.C. § 2,
alleging, among other things, that Crocs engaged in patent misuse, inequitable conduct,
and anticompetitive conduct. Docket No. 119 at 15-16. Dawgs also asserted a claim
for deceptive trade practices, alleging that Crocs made fraudulent and misleading
statements to the PTO and pursued aggressive litigation regarding the ’858 and ’789
patents, and a claim for intentional interference with business advantage. Id. at 16-18.
On August 31, 2012, Dawgs, DDD, and Effervescent, Inc. filed a motion to stay pending
the inter partes reexaminations. Docket No. 118 at 12-13. On October 1, 2012, Crocs
filed a motion to dismiss Dawgs’ counterclaims. Docket No. 131. On November 13,
2012, the Court granted Dawgs’ motion to stay and administratively closed this case.
Docket No. 139. Dawgs did not respond to Crocs’ motion to dismiss, but reserved its
right to do so if or when the administrative closure was lifted. Docket No. 138 at 1. On
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November 29, 2012, this case was consolidated with Crocs, Inc. v. CVS Caremark
Corp., No. 12-cv-02096-PAB-CBS. Docket No. 140. The consolidated action remains
administratively closed.
The PTO terminated the reexamination of the ’858 patent. Docket No. 143-1 at
31-32. In 2013, the PTO rejected the single claim of the ’789 patent as unpatentable,
id. at 43, and issued a non-final rejection of the claim of the ’789 patent. Id. at 59.
Crocs responded to the PTO’s rejection of the ’789 patent, and the ’789 proceeding s
remain pending. Docket No. 143 at 5.
In April 2014, Dawgs contacted Crocs, stating that it intended to file suit against
Crocs in Nevada and to reopen this case unless the parties could priv ately settle their
dispute over Crocs’ alleged patent misuse. Docket No. 143-1 at 62. On September 10,
2014, Dawgs filed suit against Crocs in the United States District Court for the District of
Nevada (the “Nevada case”), which was assigned to Judge Richard F. Boulware II.
U.S.A. Dawgs, Inc. v. Crocs, Inc. (“Dawgs”), No. 14-cv-01461-RFB-PAL (D. Nev. Sep.
10, 2014). Dawgs asserted claims against Crocs for monopoly and attempted
monopoly in violation of the Sherman Act, alleging that Crocs acquired a monopoly in
the molded ventilated clog-type footwear market by engaging in patent misuse, both
prior to and subsequent to the issuance of the ’858 and ’789 patents, and by bringing
baseless lawsuits. Id. (Docket No. 1 at 12-20). Dawgs also asserted a claim for
unlawful exclusionary arrangements in violation of Section 3 of the Clayton Act, 15
U.S.C. § 14, alleging that Crocs engaged in anticompetitive conduct by inducing
potential purchasers of Dawgs’ products not to deal with Dawgs. Id. (Docket No. 1 at

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20-23). In addition, Dawgs asserted state law claims against Crocs for intentional
interference with prospective economic advantage and actual contractual relationships
and unfair trade practices, alleging that Crocs engaged in anticompetitive conduct by
inducing potential purchasers of Dawgs’ products not to deal with Dawgs. Id. (Docket
No. 1 at 23-27).
On September 17, 2014, Crocs filed a motion to dismiss, arguing that Dawgs’
state law claims were barred by Nev. Rev. Stat. § 41.660. Id. (Docket No. 5 at 6). On
October 3, 2014, Crocs filed a second motion to dismiss (the “second motion to
dismiss”), arguing that Dawgs’ claims in the Nevada case were duplicative of its
counterclaims in the present case and that Dawgs’ complaint should be dismissed in its
entirety “in favor of allowing the first-filed Colorado Action to proceed.” Id. (Docket No.
13 at 15-17). Crocs argues that, in the alternative, Dawgs failed to state a claim. Id. at
18. In response to the second motion to dismiss, Dawgs conceded that it is willing to
dismiss its “non-patent counterclaims in the Colorado action to avoid the appearance of
splitting claims. Such a dismissal would be proper because Dawgs’ antitrust and tort
claims are not compulsory counterclaims to Crocs’ patent infringement claims.” Id.
(Docket No. 16 at 13-14). Dawgs has not, however, moved to dismiss its counterclaims
in this case. Dawgs argues that, by filing its first motion to dismiss, Crocs waived its
right to argue that Dawgs’ claims were duplicative. Id. (Docket No. 16 at 14-15).
Dawgs contends that, because the Nevada case and this case do not have identical
parties and claims, the rule prohibiting duplicative claims does not apply. Id. (Docket
No. 16 at 15-17). Both Crocs’ motions to dismiss in the Nevada case are fully briefed.

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On November 25, 2014, the assigned magistrate judge in the Nevada case
entered a scheduling order. Id. (Docket No. 28). Dawgs filed a motion to vacate the
scheduling order, id. (Docket No. 33), and, on January 22, 2015, the magistrate judge
stayed discovery pending Judge Boulware’s ruling on Crocs’ motions to dismiss. Id.
(Docket No. 43). At the January 22, 2015 hearing before the magistrate judge, Crocs
and the magistrate judge discussed Crocs’ intention to file the present motions in this
Court. Id. (Docket No. 44 at 18). Judge Boulware has scheduled a hearing and oral
argument on Crocs’ motions to dismiss for September 23, 2015. Id. (Docket No. 46).
On February 13, 2015, Crocs filed the present motions. Docket Nos. 142 and
143. Crocs’ motion to reopen this case seeks to reopen this case f or the limited
purpose of ruling on its motion to enjoin. Docket No. 142. Crocs’ motion to enjoin
asserts that the Nevada case should be enjoined pursuant to the “f irst to file” rule and
that Crocs should be granted leave to file a motion for sanctions against Dawgs for,
among other things, filing the Nevada case in contravention of the Court’s order
administratively closing this case. Docket No. 143 at 15-16.
II. ANALYSIS
The first to file rule applies “when two district courts have jurisdiction over the
same controversy, affording deference to the first filed lawsuit.” Lipari v. U.S. Bancorp
NA, 345 F. App’x 315, 317 (10th Cir. 2009) (unpublished); see also Hospah Coal Co. v.
Chaco Energy Co., 673 F.2d 1161, 1163 (10th Cir. 1982) (recognizing general rule that
“when two courts have concurrent jurisdiction, the first court in which jurisdiction
attaches has priority to consider the case”). The rule is a discretionary doctrine, resting

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on “principles of comity and sound judicial administration” and is concerned with
avoiding duplicative litigation, rulings which impinge on the authority of sister courts,
and piecemeal litigation. Cadle Co v. Whataburger of Alice, Inc., 174 F.3d 599, 603
(5th Cir. 1999). As a result, “when related cases are pending before two federal courts,
the court in which the case was last filed may refuse to hear it if the issues raised by the
cases substantially overlap.” Id.; accord Cherokee Nation v. Nash, 724 F. Supp. 2d
1159, 1165 (N.D. Okla. 2010).
Courts generally hold that the threshold determination under the first to file rule
requires analysis of three considerations: “(1) the chronology of actions; (2) the
similarity of parties; and (3) the similarity of issues.” Nash, 724 F. Supp. 2d at 1167;
see also Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 625 (9th Cir. 1991). The
parties to the two actions need not necessarily be identical, and “the issue must only be
substantially similar in that they seek like forms of relief and hinge on the outcome of
the same legal/factual issues.” Shannon’s Rainbow, LLC v. Supernova Media, Inc.,
683 F. Supp. 2d 1261, 1278-79 (D. Utah 2010). Ev en if all considerations weigh in
favor of the dispute being resolved in the first filed court, equitable exceptions to the
general rule may apply, such as when the balance of convenience favors the second
filed action or when special circumstances – for example, the first filing party engaging
in forum shopping or anticipatory filing – warrant giving priority to the second filed suit.
Employers Ins. of Wausau v. Fox Entm’t Grp., Inc., 522 F.3d 271, 276 (2d Cir. 2008).
The Tenth Circuit does not appear to have directly considered the appropriate
roles of the first and second filed courts in applying the first to file rule. Courts

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confronted with the issue have suggested that the proper course is for the second filed
court to make the initial determination of whether the two actions substantially overlap.
See Nash, 724 F. Supp. 2d at 1166 (citing Cadle, 174 F.3d at 605). If a second filed
court decides that question in the affirmative, it may stay the case, transfer it to the first
filed court, or, in rare cases, dismiss the case entirely; it then falls to the first filed court
“to determine whether subsequently filed cases involving substantially similar issues
should proceed.” Cadle, 174 F.3d at 606 (quotations omitted); see also Nash, 724 F.
Supp. 2d at 1167 (“This general rule of deference includes deferring to first-filed courts
for the application of any equitable exceptions to the first to file rule, once the secondfiled court has determined that there is sufficient overlap between the two cases.”). The
Court finds this approach prudent and consistent with the principles of comity and
proper judicial administration. See Chavez v. Dole Food Co., Inc., --- F.3d ----, 2015
WL 4732386, at *4 (3d Cir. Aug. 11, 2015) (approving second filed court’s dismissal of
second filed cases in part due to plaintiffs’ admission that second filed cases were
duplicative lawsuits); Burger v. Am. Maritime Officers Union, 1999 WL 46962, at *2 (5th
Cir. 1999) (approving second filed court’s determination that first filed case and second
filed case raised substantially the same issues); Cedars-Sinai Med. Ctr. v. Shalala, 125
F.3d 765, 769 (9th Cir. 1997) (“the second district court has discretion to transf er, stay,
or dismiss the second case in the interest of efficiency and judicial economy”); Thomas
& Betts Corp. v. Robroy Indus., Inc., 2015 WL 4718892, at *6 (C.D. Cal. 2015)
(concluding that first to file rule applied to second filed action and staying case until first
filed court decided pending motion to transfer case to second filed court). Bashiri v.

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Sadler, 2008 WL 2561910, at *2 (D. Ariz. June 25, 2008) (“this court must determine
whether, as the court with the second-filed suit, it should defer to the Illinois court under
the first-to-rile rule” (citing Alltrade, 946 F.2d at 622)); Nash, 724 F. Supp. 2d at 1167. 2
Crocs’ motion requests that this Court undertake the initial determination of
whether this case and the Nevada case substantially overlap. However, Crocs has also
raised this issue in the second motion to dismiss pending before the Nevada court. The
Court finds that two considerations weigh in favor of allowing the Nevada court to
decide Crocs’ second motion to dismiss. First, as discussed above, the Court agrees
with the reasoning of those courts holding that the second filed court should make the
threshold determination as to the first to file rule. See Cadle, 174 F.3d at 603
(discussing first to file rule as granting second filed court discretion not to hear the
case). The Court finds no reason to depart from that approach in this case. Judge
Boulware has scheduled a hearing and oral argument on Crocs’ motions. Dawgs
(Docket No. 46). Although the Nevada magistrate judge did not expressly prohibit
Crocs from concurrently seeking relief from this Court, the magistrate judge did not,
contrary to Crocs’ assertions, attempt to speak for Judge Boulware on the issue of
which court should make the threshold determination of substantial similarity. See id.
2

Second filed courts do not always follow this approach, reasoning that “it is the
first-filed court that should apply the first-to-file rule.” See, e.g., Wynne v.
Commemorative Air Force, 2006 WL 2486562, at *2 (S.D. Ohio Aug 28, 2006); see also
Daimler Chrysler Corp. v. Gen. Motors Corp., 133 F. Supp. 2d 1041, 1044 (N.D. Ohio
2001) (“It is also more appropriate, as a matter of judicial comity, for the court of first
filing to determine whether to retain or relinquish jurisdiction, rather than leave it to the
court of later filing to make that decision.” (collecting cases)). However, it is not clear
that such decisions recognize the distinction between the second filed court making the
initial determination as to substantial overlap and then deferring to the first filed court for
its determination of how the first-to-file rule should be applied to both actions.
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(Docket No. 44 at 18:12-16) (“[W]hat you do in Colorado is up to you. I just need to
have a mechanism to keep this case moving forward on this Court’s docket and [do] not
speak for the District Judge on what he wants to do with the pending motions to
dismiss.”). Under the circumstances, the Court concludes that the proper course is to
await Judge Boulware’s ruling on whether the Nevada action is duplicative of this case.
Second, even assuming that this Court were to decide, which it does not, that
this case and the Nevada case substantially overlap, the remedy Crocs requests,
namely, that this Court enjoin Dawgs and DDD from pursuing the Nevada action, is
untenable under these circumstances. “‘When an injunction sought in one federal
proceeding would interfere with another federal proceeding, considerations of comity
require more than the usual measure of restraint, and such injunctions should be
granted only in the most unusual cases.’” See Commodity Futures Trading Comm’n v.
Chilcott Portfolio Mgmt., Inc., 713 F.2d 1477, 1484 (10th Cir. 1983) (quoting Bergh v.
Washington, 535 F.2d 505, 507 (9th Cir. 1976)); see also Smith v. SEC, 129 F.3d 356,
361-62 (6th Cir. 1997) (“absent some particular reason to favor one forum, a federal
court does not have the power to destroy the jurisdiction of a sister court for the sole
purpose of preserving its own”; “it requires clear justification before a federal court may
interfere with the jurisdiction of another federal court” (quotation omitted)). The Court is
not persuaded that this is an unusual case. In so concluding , the Court recognizes that
other first filed courts in the Tenth Circuit have enjoined the plaintiffs in second filed
proceedings under similar circumstances. See, e.g., Victor Co., L.L.C. v. Ortho
Organizers, Inc., 932 F. Supp. 261, 263 (D. Kansas 1996) (citing Chicago Pneumatic

10

Tool Co. v. Hughes Tool Co., 180 F.2d 97, 101 (10th Cir. 1950) (“A Federal District
Court which first obtains jurisdiction of parties and issues may preserve its jurisdiction
by enjoining proceedings involving the same issues and parties, begun thereafter in
another Federal District Court.”); Shannon’s Rainbow, 683 F. Supp. 2d at 1280. Such
cases do not, however, account for or otherwise discuss the possibility of seeking relief
in the second filed court. As one court put it, the normal course is for the second filed
court to exercise its discretion to transfer, stay, or dismiss the second action and
considerations of comity in the case bar counsel against enforcement of the
first-filed rule via an injunction issued by the first court against the second
court. Plaintiff cites no good reason why it does not first ask the Kansas
district court in the second filed action to stay proceedings therein in
deference to the first-filed rule.
Nat’l Union Fire Ins. Co. of Pittsburgh, PA. v. Payless Shoesource, Inc. , 2012 WL
3277222, at *7-*9 (C.D. Cal. Aug. 9, 2012). Crocs does not argue that it cannot
properly litigate these issues in the Nevada case, and no basis exists for so concluding,
which counsels heavily against granting Crocs the relief it seeks. See Alabama v. U.S.
Army Corps of Engineers, 424 F.3d 1117, 1132 (11th Cir. 2005) (“Generally, if a party
will have opportunity to raise its claims in the concurrent federal proceeding sought to
be enjoined, that concurrent proceeding is deemed to provide an adequate remedy at
law.”); 11A Charles Alan Wright et al., Federal Practice & Procedure § 2942 (3d ed.
2015) (“if the party seeking the injunction could raise the same issues in the other
proceeding, the court typically will take the position that the party has an adequate
alternative remedy and does not need injunctive relief”). The Court is not therefore
persuaded that, as a general matter, the Tenth Circuit would hold that mere invocation

11

of the first to file rule constitutes an unusual case warranting enjoining the plaintiffs from
proceeding in another federal court, see Chilcott Portfolio Mgmt., 713 F.2d at 1484, 3
and Crocs does not establish that this case is particularly unusual.
Crocs argues that this Court should not concern itself with principles of comity
because the Nevada magistrate judge implicitly approved its decision to pursue relief in
this Court. Docket No. 143 at 14-15. As noted abov e, Crocs overstates the magistrate
judge’s comment on this issue and Crocs offers no other persuasive reason for
concluding that principles of comity weigh in its favor. Crocs argues that, by filing the
Nevada case, Dawgs disobeyed this Court’s order administratively closing the case,
Docket No. 159 at 1, and, as a result, that the Court should enjoin the Nev ada
proceeding to protect its own jurisdiction. Id. at 7. Assuming, without deciding, that
Crocs accurately characterizes Dawgs’ conduct, such an argument does not overcome
the fact that the relief Crocs seeks is more appropriately pursued in the Nevada case.
Crocs argues that relief from this Court is necessary in the event Dawgs amends its
complaint in the Nevada case or files another lawsuit, but such an argument is
speculative at best. Crocs otherwise fails to establish extraordinary circumstances
justifying the relief it seeks. Cf. In re Checking Account Overdraft Litig., 859 F. Supp.
3

Despite Crocs’ arguments to the contrary, Hospah does not counsel in favor of a
different result. See Docket No. 159 at 7 n.6. In Hospah, plaintiffs in a second filed
declaratory judgment action successfully convinced the second filed court to enjoin
defendants in the second filed case from proceeding with the first filed case. 673 F.2d
at 1162-63. The Tenth Circuit held that the proper procedure for plaintiffs in the second
filed case would have been to file a motion to dismiss for improper venue or a motion to
transfer in the first filed court and, as a result, directed the second f iled court to dismiss
its injunction of the first filed case. Id. at 1164. Hospah therefore supports the
proposition that enjoining a proceeding pending in another court is inappropriate where
parties have the ability to seek relief in that court.
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2d 1313, 1325 (S.D. Fla. 2012) (enjoining later filed action that undermined pending
multi-district litigation). Thus, even if the Court were to undertake analysis of whether
this case and the Nevada case substantially overlap, an affirmative finding on that issue
would not, by itself, justify enjoining the Nevada case. Crocs does not suggest an
alternative remedy. Crocs’ motion to enjoin the Nevada proceeding is therefore denied.
Crocs also seeks leave to file a motion for sanctions against Dawgs for violating
the Court’s stay. Docket No. 143 at 15. Crocs’ request is somewhat unclear. Crocs
does not explain why it requires leave to file a motion for sanctions. This aspect of
Crocs’ motion is denied.4
III. CONCLUSION
For the foregoing reasons, it is
ORDERED that Crocs’ Motion to Enjoin and Prevent Violations of Stay by Dawgs
and DDD; Request for Leave to File Motion for Sanctions [Docket No. 143] is DENIED
and Crocs’ Administrative Motion to Reopen Case for Purpose of Hearing Crocs’s
Motion to Enjoin and Prevent Violations of Stay by Dawgs and DDD; Request for Leave
to File Motion for Sanctions [Docket No. 142] is DENIED as moot.

DATED September 21, 2015.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge
4

The Court need not reach the parties’ remaining arguments in resolving the
present motion.
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