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

Filing 842

ORDER by Chief Judge Philip A. Brimmer on 7/14/2020, re: 832 Double Diamond Distribution, LTD. and Mojave Desert Holdings, LLCs Motion to Re-Open Cases for Good Cause is GRANTED; 833 Mojave Desert Holdings, LLC Motion to Substitute or Jo in as the Real Party-In-Interest of U.S.A. Dawgs, Inc.s Claims and Counterclaims Against Crocs and the Snyder Defendants is GRANTED in part and DENIED in part. ORDERED that Civil Action Nos. 06-cv-00605-PAB-KMT and 16-cv-02004-PAB-KMT shall be REOPENED. ORDERED that Mojave Desert Holdings, LLC shall be joined to Civil Action Nos. 06-cv-00605-PAB-KMT and 16-cv-02004-PAB-KMT..(sphil, )

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,

JOHN P. MCCARVEL,
ERIK REBICH, and
SARA HOVERSTOCK,

Defendants.

ORDER

This matter is before the Court on Double Diamond Distribution, LTD. and
Mojave Desert Holdings, LLC’s Motion to Re-Open Cases for Good Cause [Docket No.
832] and Mojave Desert Holdings, LLC’s Motion to Substitute or Join as the Real PartyIn-Interest of U.S.A. Dawgs, Inc.’s Claims and Counterclaims Against Crocs and the
Snyder Defendants [Docket No. 833].
I. BACKGROUND
Crocs, Inc. (“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.
On May 12, 2006, Effervescent, Inc., Holey Soles Holdings, Ltd., and former
defendant Collective Licensing International, LLC moved to stay this case pending
proceedings under Section 337 of the Tariff Act of 1930 before the International Trade
Commission. Docket No. 26. The Court granted the motion on May 16, 2006 and
administratively closed the case. Docket No. 31. In 2012, during a brief reopening of
the case, Crocs added one of the U.S.A. Dawgs, Inc. (“Dawgs”) entities as a named
defendant and Dawgs asserted counterclaims, Docket No. 119, before the action was
stayed pending a reexamination of the patents-in-suit. Docket No. 137. In February
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2016, Dawgs filed motions to reopen the case and lift the stay, Docket Nos. 167, 168,
which the Court granted. Docket No. 184. On May 31, 2016, Dawgs filed its first
amended answer to the amended complaint and counterclaims against Crocs, Scott
Seamans, and John and Jane Does 1 through 100. Docket No. 209.
On August 5, 2016, Dawgs filed its complaint in Case No. 16-cv-02004-PABKMT (“the 2016 lawsuit”). Case No. 16-cv-02004, Docket No. 1. The 2016 lawsuit
named 18 individual defendants, all of whom were current or former employees of
Crocs. Id. at 10-19, ¶¶ 9-14.
This case and the corresponding consolidated action, Civil Action No.16-cv02004-PAB-KMT, were administratively closed on March 19, 2018. Docket No. 821.
Dawgs filed for Chapter 11 bankruptcy and the Court administratively closed the cases
because “allow[ing] this matter to proceed in a piecemeal fashion pending resolution of
the bankruptcy proceeding . . . would impose unnecessary burdens on both the parties
and the Court.” Docket No. 821 at 4.
Double Diamond Distribution, LTD (“Double Diamond”) and Mojave Desert
Holdings, LLC (“Mojave”) move to reopen the consolidated cases. Docket No. 832.
Additionally, Mojave now claims that the bankruptcy proceeding is complete and that it
purchased Dawgs’s legal claims in the consolidated actions. Docket No. 833 at 5. As a
result, Mojave moves to be substituted or joined as the real party in interest. See
Docket No. 833.

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II. ANALYSIS
A. Substitution
Mojave informs the Court that Dawgs’s bankruptcy proceedings are finished and
that Mojave has purchased “all of its rights . . . in and to the -605 and -2004 cases, as
well as all other rights arising out of these claims and the facts and circumstances
giving rise to such claims including the right to bring claims and counterclaims and raise
defenses.” Docket No. 833 at 5 (citations and quotations omitted).
Rule 25(c) states that, “if an interest is transferred, the action may be continued
by or against the original party.” Fed. R. Civ. P. 25(c). Importantly, “Rule 25(c) . . . does
not require that anything be done after an interest has been transferred. . . . An order
of joinder is merely a discretionary determination by the trial court that the transferee’s
presence would facilitate the conduct of the litigation.” Wright & Miller, Transfer of
Interest in Action, 7C Fed. Prac. & Proc. Civ. § 1958 (3d ed.). A party may be
substituted or joined in “the sound discretion of the trial court.” Prop-Jets, Inc. v.
Chandler, 575 F.2d 1322, 1324 (10th Cir. 1978).
Crocs argues that substitution or joinder is inappropriate for three reasons.
Crocs states that “there are questions about [(1)] whether Mojave is in fact the real
party-in-interest, [(2)] the process by which it acquired the claims, and [(3)] its standing
to seek the relief asserted.” Docket No. 835 at 3. Each argument is unpersuasive.
First, Crocs argues that Mojave seeks to “have their prey and eat it too” by only
taking ownership of Dawgs’s claims and not Dawgs’s liabilities. Id. at 4. But Mojave
makes no such assertion. Mojave purchased all of Dawgs’s claims and expressly

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agrees to “stand in Dawgs’[s] shoes” and “tak[e] on liability” as to Crocs’s claims.
Docket No. 839 at 4-5. Second, Crocs asserts that the right to Dawgs’s litigation claims
is not yet determined. Docket No. 835 at 5. However, the bankruptcy court allowed a
third-party, Optimal Investment Group (“OIG”), Docket No. 836-10 at 18, to purchase
Dawgs’s claims free and clear and noted that OIG was a purchaser in good faith.
Docket No. 833-2 at 6-8. Additionally, as Mojave points out, the ongoing lawsuits do
not pertain to the ownership of Dawgs’s litigation claims. Docket No. 838 at 5-8. Thus,
the outcome of those proceedings will have no effect on Mojave’s ownership of
Dawgs’s claims, which Mojave purchased from OIG after a valid bankruptcy
proceeding. For similar reasons, Crocs’s argument that there was some impropriety in
the bankruptcy sale is misleading. Although the bankruptcy court noted that Steven
and James Mann attempted to maintain control over the litigation claims, that attempt
failed, and the claims were sold free and clear to OIG. Docket No. 836-10 at 18-19.
As to standing, the Court agrees with Mojave that a motion to substitute or join is
not the proper place to litigate the issue and, thus, the Court does not consider it. 1
The Court, however, agrees with Crocs that, given the many moving parts to the
litigation and various ongoing proceedings involving both Dawgs and Mojave, the
prudent action is to join Mojave, rather than substitute it. As a result, the Court will
grant Mojave’s motion to join.

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The Court notes that the Supreme Court’s opinion in Sprint Communications
Co., L.P. v. APCC Services, Inc., 554 U.S. 269 (2008), appears to foreclose Crocs’s
argument that Mojave does not have standing, constitutional or prudential, to assert
Dawgs’s assigned claims. There, the Supreme Court held that an assignee has both
constitutional and prudential standing to assert statutory claims. Id. at 286-292.
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B. Whether to Reopen Case
Mojave and Double Diamond argue that, because the bankruptcy proceedings
are complete, there exists good cause to reopen the case. Docket No. 832 at 2. Crocs
argues that the case should not be reopened because (1) there is ong oing litigation
involving Mojave, (2) there was a delay moving to reopen the case, (3) Mojave and
Double Diamond have not outlined how they plan to streamline the case, (4) there is no
ongoing harm to Mojave and Double Diamond because neither are in the footwear
business, and (5) Crocs will be prejudiced due to the lack of clarity on whom to serve
discovery requests and whether those entities will comply. Docket No. 834 at 3-13.
The Court will address each in turn.
First, as discussed above, the ongoing litigation does not involve Mojave’s
ownership of Dawgs’s claims. As a result, the various other proceedings that Mojave is
involved in do not bear on whether the consolidated actions should be reopened.
Second, in this case, any delay on its own does not provide a reason to keep the
case administratively closed. First, Mojave and Double Diamond noted their intention to
reopen the case in October 2018. Docket No. 827 at 2. Crocs w anted the case to
remain closed. Id. While there is a delay of a year between the October 2018 status
report and Mojave and Double Diamond’s motion to reopen, the Court finds that this
delay is insufficient to deny reopening the case. Crocs cites Wesson v. Hope Mining,
Milling, and Leasing Co., No. 00-cv-02403, 2011 WL 6440493, at *5 (D. Colo. Dec. 11,
2011), in support of its argument that delay should prevent reopening of the case.
There, however, the counsel “admitted that she was not diligent in following the

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deadlines in that she stated the case ‘just slipped throug h the cracks.’” Id. Here, there
is no evidence that counsel mismanaged the case or that they missed any courtmandated deadlines.
Third, Crocs cites no authority for the proposition that an adverse litigant must
offer a detailed look into its litigation strategy and how it intends to pursue the case
before the case may be reopened. Thus, this argument in unpersuasive.
Fourth, Crocs’s argument as to ongoing harm goes to the merits of the
underlying claims, not to whether the case should be reopened. See Gorsuch, Ltd. v.
Wells Fargo Nat’l Bank Ass’n, No. 11-cv-00970-PAB-MEH, 2013 WL 1910636, at *2 (D.
Colo. May 8, 2013) (noting that the “viability of plaintiffs’ third-party claims [was] not
properly before the Court on plaintiffs’ motion to reopen and [would] not be addressed
until such time as plaintiffs file[d] a motion to assert [such] claims”). The nature and
extent of any remaining claims can be addressed once the case is reopened.
Finally, Crocs’s argument that it is unclear on whom to serve discovery and
whether the purchaser of Dawgs’s assets will comply is unavailing. The same issue
arises for assignee suits and, as the Supreme Court stated in Sprint, “[e]ven assuming
[third-parties are not forthcoming], courts have long permitted assignee lawsuits
notwithstanding the fact that such problems could arise. Regardless, courts are not
helpless in the face of such problems. [A] district court can, if appropriate, compel a
party to collect and to produce whatever discovery-related information is necessary.”
554 U.S. at 291-92.
The Court ordered the case administratively closed due to the then-pending
bankruptcy litigation. See Docket No. 821. That proceeding is completed in relevant
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aspects and Mojave is now the owner of Dawgs’s litigation claims. The Court therefore
finds that there is good cause to reopen the case.
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED that Double Diamond Distribution, LTD. and Mojave Desert Holdings,
LLC’s Motion to Re-Open Cases for Good Cause [Docket No. 832] is GRANTED. It is
further
ORDERED that Civil Action Nos. 06-cv-00605-PAB-KMT and 16-cv-02004-PABKMT shall be reopened. It is further
ORDERED that Mojave Desert Holdings, LLC Motion to Substitute or Join as the
Real Party-In-Interest of U.S.A. Dawgs, Inc.’s Claims and Counterclaims Against Crocs
and the Snyder Defendants [Docket No. 833] is GRANTED in part and DENIED in part.
It is further
ORDERED that Mojave Desert Holdings, LLC shall be joined to Civil Action Nos.
06-cv-00605-PAB-KMT and 16-cv-02004-PAB-KMT.
DATED July 14, 2020.
BY THE COURT:

PHILIP A. BRIMMER
Chief United States District Judge

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