LANARD TOYS LIMITED v. TOYS "R" US-DELAWARE,INC. et al

Filing 391

ORDER staying and administratively closing this case. Joint status reports due every 120 days. Signed by Judge Marcia Morales Howard on 11/13/2017. (JW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION

LANARD TOYS LIMITED,
Plaintiff,
Case No. 3:15-cv-849-J-34PDB
v.
TOYS “R” US-DELAWARE, INC.,
DOLGENCORP LLC and JA-RU, INC.,
Defendants.
/

ORDER
THIS CAUSE comes before the Court on the question of whether this action should
be stayed with respect to non-debtor defendants Dolgencorp LLC (Dolgencorp) and JaRu, Inc. (Ja-Ru).

On September 19, 2017, Ja-Ru filed Defendant’s Suggestion of

Bankruptcy for Toys “R” Us-Delaware, Inc. (Doc. 384; Suggestion), advising the Court that
Defendant Toys “R” Us-Delaware, Inc. (TRU) has filed a bankruptcy petition in the United
States Bankruptcy Court for the Eastern District of Virginia. See Suggestion at 1. In light
of this, Ja-Ru asserted that all deadlines in this action should be vacated and the trial
rescheduled. Id. On September 19, 2017, Plaintiff Lanard Toys Limited (Lanard) advised
the Court of its position that this case could proceed against Dolgencorp and Ja-Ru. See
Plaintiff’s Notice of Continuation of Case (Doc. 385). In light of the parties’ conflicting
positions, on September 20, 2017, the Court entered an order directing the parties to file
“memoranda on the issue of whether this action should proceed without the bankrupt party
or should be stayed in its entirety.” See Order (Doc. 386; Briefing Order) at 2. The parties
filed briefs in response to the Briefing Order on October 16, 2017.

1

See Ja-Ru and

Dolgencorp Brief [sic] on Need [sic] for Stay Due to Bankruptcy Filing of Toys “R” UsDelaware, Inc. (Doc. 390; Defendants’ Brief) and Plaintiff’s Memorandum of Law in Support
of Continuation of Case as to Defendant’s Dolgencorp, LLC and Ja-Ru, Inc. (Doc. 389;
Lanard’s Brief). Accordingly, this matter is ripe for review.
I.

Procedural Background
This action arises out of Defendants’ alleged infringement of Lanard’s intellectual

property interests in the “Chalk Holder”—“a device that can hold pieces of colored chalk to
allow children to draw outdoors.” See Second Amended Complaint and Demand for Jury
Trial (Doc. 103; Second Amended Complaint) ¶11, 23, 26. Specifically, Lanard alleges
that Ja-Ru created a less expensive version of the Chalk Holder, and that TRU and
Dolgencorp opted to sell Ja-Ru’s product instead of Lanard’s Chalk Holder. Id. ¶¶21, 2324, 26.
Lanard initiated this action on March 27, 2014 by filing the Complaint and Demand
for Trial by Jury (Doc. 1; Complaint) in the United States District Court for the District of
New Jersey. With leave of Court, see Order Granting Joint Motion to Correct Parties and
For Lanard to File an Amended Complaint (Doc. 57-2), Lanard filed an amended complaint
on June 16, 2014, see Amended Complaint and Demand for Trial by Jury (Doc. 61;
Amended Complaint). On June 16, 2015, the assigned judge from the District of New
Jersey transferred the action to this Court. See Opinion and Order on Defendants’ Motion
to Transfer Venue (Doc. 92).
With leave of Court, see Order (Doc. 97), Lanard filed the Second Amended
Complaint on August 10, 2015, and asserted claims for copyright infringement, see Second
Amended Complaint ¶¶35-39, patent infringement, id. ¶¶40-47, trade dress infringement,

2

id. ¶¶48-53, and common law unfair competition, id. ¶¶54-59. Lanard brought each claim
against all Defendants. Id. ¶¶35-59. Although Defendants filed separate answers, they
each asserted identical counterclaims against Lanard seeking declarations regarding the
invalidity of Lanard’s copyright registration, patent, and trade dress, and the lack of unfair
competition. See Answer, Affirmative Defenses, and Counterclaim to Second Amended
Complaint, and Demand for Jury Trial, of Defendant Dolgencorp, LLC (Doc. 110;
Dolgencorp’s Answer) at 13-19; Answer, Affirmative Defenses and Counterclaim to
Second Amended Complaint, and Demand for Jury Trial, of Defendant Ja-Ru, Inc. (Doc.
111; Ja-Ru’s Answer) at 11-16; and Answer, Affirmative Defenses, and Counterclaim to
Second Amended Complaint, and Demand for Jury Trial, of Defendant Toys ‘R’ UsDelaware, Inc. (Doc. 112; TRU’s Answer) at 13-18.
On October 15, 2015, the Court entered the Case Management and Scheduling
Order and Referral to Mediation (Doc. 127; Scheduling Order), setting this case for the
January 3, 2017 trial term. However, on March 1, 2016, the Court vacated the Scheduling
Order and stayed this action “pending a decision on an anticipated motion to disqualify
counsel.” See Order (Doc. 167). The Court lifted the stay on December 16, 2016. See
Order (Doc. 202).

On January 30, 2017, the Court entered the Amended Case

Management and Scheduling Order (Doc. 210; Amended Scheduling Order), setting the
case for the December 4, 2017 trial term, a July 7, 2017 discovery deadline, and a July 24,
2017 deadline to file dispositive and Daubert Motions. Id.
On July 24, 2017, Lanard filed Plaintiff’s Motion for Partial Summary Judgment (Doc.
299; Lanard’s SJ Motion), and Defendants jointly filed Defendants’ Dispositive Motion for
Summary Judgment and Memorandum of Law in Support (Doc. 302; Defendants’ SJ

3

Motion). The parties filed their respective responses to the motions on August 7, 2017.
See Defendants Toys “R” Us-Delaware, Inc., Dolgencorp, LLC and Ja-Ru, Inc.’s Response
in Opposition to Plaintiff Lanard Toys Limited’s Motion for Partial Summary Judgment (Doc.
320; Defendants’ SJ Response) and Plaintiff’s Response in Opposition to Defendants’
Motion for Summary Judgment (Doc. 321; Lanard’s SJ Response).1 With leave of Court,
see Order (Doc. 369), Lanard filed a reply brief, see Plaintiff Lanard Toys Limited’s
Response in Reply to Defendants’ Response in Opposition to Plaintiff’s Motion for Partial
Summary Judgment (Doc. 382; Lanard’s SJ Reply).
In addition to the cross-motions for summary judgment, the parties have filed
numerous other motions, which are pending before the Court. Defendants jointly filed, and
Lanard responded to, the following motions:


Defendants’ Daubert Motion to Exclude Parker H. Bagley as an Expert and
to Exclude His Rebuttal Expert Report and Testimony for All Purposes (Doc.
309);
o Plaintiff’s Response in Opposition to Defendants’ Daubert Motion to
Exclude Parker H. Bagley as an Expert and to Exclude His Rebuttal
Expert Report and Testimony for All Purposes (Doc. 332);



Defendants’ Daubert Motion to Disqualify Robert John Anders and Preclude
Testimony (Doc. 314);
o Plaintiff Lanard Toys Limited’s Response in Opposition to
Defendants’ Daubert Motion to Disqualify Robert John Anders and
Preclude Testimony (Doc. 329);



1

Defendants’ Daubert Motion to Exclude Larry B. Myer as an Expert, Exclude
His Initial and Rebuttal Expert Reports and Testimony for All Purposes, or
Alternatively Motion to Strike New Materials and Opinions in Rebuttal Report
(Doc. 315);

The parties filed their motions under seal with leave of Court. See Order (Doc. 307).

4

o Plaintiff’s Response in Opposition to Defendants’ Daubert Motion to
Exclude Larry B. Myer as an Expert, and His Initial and Rebuttal
Expert Reports and Testimony, and Motion to Strike (Doc. 334);


Defendants’ Daubert Motion to Exclude William Kerr’s Expert Report and
Reply Expert Report and to Exclude Testimony for All Purposes, or
Alternatively to Strike New Materials and Opinions in Reply Report;
Memorandum of Law (Doc. 316; Motion to Exclude Kerr);
o Plaintiff Lanard Toys Limited’s Opposition to Defendants’ Daubert
Motion to Exclude William Kerr’s Expert Report and Reply Expert
Report and to Exclude Testimony for All Purposes, or Alternatively to
Strike New Materials and Opinions in Reply Report (Doc. 335);2



Defendants’ Unopposed Motion to Maintain Under Seal Certain (1)
Deposition Transcripts and Deposition Exhibits, or Portions Thereof; and (2)
Exhibits, Declarations and/or Briefs, or Portions Thereof, Filed Under Seal
or Provisionally Under Seal in Support of the Parties’ Summary Judgment
Motions and Oppositions and Daubert Motions and Oppositions (Doc. 375);



Defendants’ Motion for Sanctions (Doc. 377); and
o Plaintiff Lanard Toys Limited’s Response in Opposition to
Defendants’ Motion for Sanctions (Doc. 383).

Lanard also filed a series of Daubert Motions, to which Defendants have jointly responded,
as follows:


Plaintiff’s Motion to (1) Strike the Supplemental Report of Ronald B. Kemnitzer as
Untimely; and (2) Exclude the Opinions and Testimony of the Defendants’ Purported
Expert Ronald B. Kemnitzer (Doc. 310);
o Defendants’ Response in Opposition to Plaintiff Lanard Toys Limited’s
Motion (1) to Strike the Supplemental Report of Ronald B. Kemnitzer as
Untimely; and (2) to Exclude the Opinions and Testimony of Ronald B.
Kemnitzer (Doc. 336);

2

Defendants have sought leave to file this motion under seal. See Defendants’ Unopposed Motion to
Maintain Under Seal Certain (1) Deposition Transcripts and Deposition Exhibits, or Portions Thereof; and (2)
Exhibits, Declarations and/or Briefs, or Portions Thereof, Filed Under Seal or Provisionally Under Seal in
Support of the Parties’ Summary Judgment Motions and Oppositions and Daubert Motions and Oppositions
(Doc. 375; Seal Motion). The Court has yet to rule on the Seal Motion.

5



Plaintiff Lanard Toys Limited’s Motion to Exclude the Opinions and Testimony of the
Defendants’ Purported Expert Michael J. Mard, CPA (Doc. 312; Motion to Exclude
Mard);3
o Defendants’ Response in Opposition to Plaintiff Lanard Toys Limited’s
Motion to Exclude the Opinion and Testimony of Michael J. Mard (Doc. 333);



Plaintiff Lanard Toys Limited’s Motion to Exclude the Opinions and Testimony of
Deborah Ryan (Doc. 313); 4
o Defendants’ Response in Opposition to Plaintiff Lanard Toys Limited’s
Motion to Exclude the Opinion and Testimony of Deborah Ryan (Doc. 331);



Plaintiff’s Motion to Maintain Confidentiality (Doc. 374); and
o Defendants’ Response in Opposition to Plaintiff’s Motion to Maintain
Confidentiality (Doc. 381).
On October 2, 2017, Ja-Ru and Dolgencorp (collectively, the Remaining

Defendants) filed Defendants’ Motion to Modify the Scheduling Order (Doc. 387; Motion to
Modify). The Court granted the Motion to Modify, in part, on October 4, 2017, and set this
action for the trial term beginning on April 2, 2018. See Order (Doc. 388) at 2.
On October 6, 2017, Lanard filed a motion in the Bankruptcy Court seeking relief
from the automatic stay to continue prosecuting this action against TRU. See Motion for
Relief from Stay Pursuant to 11 U.S.C. § 362(d) to Continue Pending Litigation (Doc. 3901; Motion for Relief from Stay). Although the Remaining Defendants “do not know at this
time when this Motion will be resolved by the bankruptcy court,” see Defendants’ Brief at 1
n.1, Plaintiff represents that it “expects a ruling in three to four weeks” from October 16,
2017, see Lanard’s Brief at 5.

3

Lanard filed this motion under seal with leave of Court. See Order (Doc. 372; Seal Order).

4

Lanard filed this motion under seal with leave of Court. See Seal Order.

6

II.

Discussion
Title 11 U.S.C. § 362 provides that:
a petition filed under section 301, 302, or 303 of this title, . . . operates as a
stay, applicable to all entities, of the commencement or continuation,
including the issuance or employment of process, of a judicial,
administrative or other action or proceeding against the debtor that was or
could have been commenced before the commencement of the case under
this title, or to recover a claim against the debtor that arose before the
commencement of the case under this title.

“‘Although the scope of the automatic stay is broad, the clear language of section 362(a)
stays actions only against a ‘debtor.’” Chi. Title Ins. Co. v. Lerner, 435 B.R. 732, 735 (S.D.
Fla. 2010) (quoting McCartney v. Integra Nat’l Bank N., 106 F.3d 506, 509 (3d Cir. 1997));
see also Am. Prairie Constr. Co. v. Hoich, 560 F.3d 780, 789 (8th Cir. 2009) (“It is wellestablished that stays pursuant to § 362(a) are limited to debtors and do not encompass
non-bankrupt co-defendants.”); In re TXNB Internal Case, 483 F.3d 292, 301 (5th Cir.
2007); Lynch v. Johns-Mansville Sales Corp., 710 F.2d 1194, 1197 (6th Cir. 1983); Pitts v.
Unarco Industr., Inc., 698 F.2d 313, 314 (7th Cir. 1983). However, the protections of the
automatic stay may be extended to enjoin litigation against non-bankrupt co-defendants of
the debtor in “unusual circumstances,” such as “when there is such identity between the
debtor and the third-party defendant . . . that a judgment against the third-party defendant
will in effect be a judgment or finding against the debtor.” Kreisler v. Goldberg, 478 F.3d
209, 213 (4th Cir. 2007) (citing A.H. Robbins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir.
1986)); In re Colonial BancGroup, Inc. Sec. Litig., No. 2:09cv104-MHT, 2010 WL 119290,
at *1 (M.D. Ala. Jan. 7, 2010); In re Sunbeam Sec. Litig., 261 B.R. 534, 536-37 (S.D. Fla.
2001). This can occur when a non-debtor defendant “‘is entitled to absolute indemnity by
the debtor on account of any judgment that might result against them in the case,’” Kreisler,

7

478 F.3d at 213 (citation omitted); Lerner, 435 B.R. at 735-36, “where suit against a thirdparty defendant sought ‘possession or [ ] control over property of the debtor,’” Sunbeam
Sec. Litig., 261 B.R. at 536 (citing A.H. Robbins, 788 F.2d at 1001), “where stay protection
was deemed essential to the debtor’s efforts of reorganization,” id. at 536-37, and where
the debtor is at risk of being collaterally estopped in subsequent suits, In re Fiddler’s Creek,
LLC, No. 9:10-bk-3846-ALP, 2010 WL 6618876, at **2-3 (M.D. Fla. Sept. 15, 2010).
The Court finds that the “unusual circumstances” doctrine does not apply here. In
Defendants’ Brief, the Remaining Defendants improperly assert that Abrams v. Integrated
Pro Servs., LLC, No. CV 07-8426, 2015 WL 7458604 (E.D. La. Nov. 24, 2015) suggests
that the Court should extend the automatic stay because Lanard’s allegations against the
Remaining Defendants and TRU “are so intertwined that severance is inappropriate.” See
Defendants’ Brief at 3 n.7 (citing Abrams, 2015 WL 7458604 at *4). However, in Abrams,
the court stayed the action against the non-debtor defendants pursuant to its inherent
authority, and not under § 362. See Abrams, 2015 WL 7458604 at *4. Nevertheless, the
Remaining Defendants also argue that the Court should exercise its inherent authority to
stay this action—at least until the bankruptcy court has decided Lanard’s Motion for Relief
from Stay. See Defendants’ Brief at 3-5. Specifically, Ja-Ru and Dolgencorp argue that
severing the claims by and against TRU from this action “would raise the usual concerns
about piecemeal litigation with duplicative proceedings and increased utilization of judicial
and party resources guaranteed and inconsistent results possible.” Id. at 4. Lanard, on
the other hand, asserts that the Court should allow this case to proceed against the
Remaining Defendants despite the automatic stay against TRU. See Lanard’s Brief at 89. Lanard argues that staying this action in its entirety would interfere with its “right to an

8

expeditious trial of its claims,” and “the countervailing interest of this Court . . . to proceed
with its docket.” Id. at 8.
As explained by the Supreme Court:
the power to stay proceedings is incidental to the power inherent in every
court to control the disposition of the causes on its docket with economy of
time and effort for itself, for counsel, and for litigants. How this can best be
done calls for the exercise of judgment, which must weigh competing
interests and maintain an even balance.
Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936). “A stay of proceedings . . . is based
on a balancing test in which the movant bears the burden of showing either ‘a clear case
of hardship or inequity’ if the case proceeds, or little possibility the stay will harm others.”
Dunn v. Air Line Pilots Ass’n, 836 F. Supp. 1574, 1584 (S.D. Fla. 1993). “[C]ourts examine
general factors such as whether a stay will unduly prejudice or tactically disadvantage the
non-moving party; simplify the issues and streamline trial; and reduce the burden of
litigation on the parties and on the court.” Brent v. Source Interlink Distribution, LLC, No.
2:14-cv-52-FtM-38DNF, 2014 WL 4162770, at *2 (M.D. Fla. Aug. 21, 2014). Notably, “[a]
district court’s inherent power to stay proceedings is not mitigated or obviated by § 362(a).”
Gulfmark Offshore, Inc. v. Bender Shipbuilding & Repair Co., No. 09-249-WS-N, 2009 WL
2413664, at *3 n.6 (S.D. Ala. Aug. 3, 2009) (citing Kreisler, 478 F.3d at 215).
The Court concludes that on balance, the interests of the parties as well as the
Court are best served by staying this action. In the Second Amended Complaint, Lanard
asserts each of its four claims against all Defendants without specifying the basis for each
Defendant’s liability. See Second Amended Complaint ¶¶35-59; see also Peterson v.
Avantair, Inc., No. 8:13-cv-1683-T-33EAJ, 2013 WL 4506414, at *2 (M.D. Fla. Aug. 23,
2013) (granting a stay where “the operative complaint ‘contain[ed] no separate count

9

against the Individual Defendants and d[id] not seek any separate relief from the Individual
Defendants.’”) (citation omitted).

Although Defendants filed separate answers, they

asserted identical counterclaims against Lanard seeking declarations regarding the
invalidity of Lanard’s patent, copyright registration, and trade dress, as well as the lack of
unfair competition. See Dolgencorp’s Answer at 13-19; Ja-Ru’s Answer at 11-16; and
TRU’s Answer at 13-18. Accordingly, a stay of this action is appropriate to avoid piecemeal
litigations, as all claims and counter-claims “are comprised of common questions of law
and fact more suitably resolved in a single proceeding.” Peterson, 2013 WL 4506414 at
*2.
Notably, the eleven motions currently pending before the Court also involve
common questions of law and fact. In the cross-motions for summary judgment, the parties
argue extensively over the validity of Lanard’s patent and copyright registration, and
whether Ja-Ru’s product infringed Lanard’s rights. See generally Lanard’s SJ Motion and
Defendants’ SJ Motion.

Although Lanard asserts that “Dolgencorp and Ja-Ru have

separate and independent liability for their separate and independent infringements of
Plaintiff’s intellectual property rights in the Chalk Pencil,” see Lanard’s Brief at 5, the issues
raised in the cross-motions for summary judgment involve common questions of law and
fact. Indeed, the parties focus on the threshold issues of Lanard’s rights in the Chalk Holder
design and whether Ja-Ru’s product infringes those rights. The expert opinions in dispute
in the pending Daubert motions also involve questions of law and fact common to all
Defendants.5

5

Although William Kerr separately analyzed the damages caused by TRU and Dolgencorp, see Motion
to Exclude Kerr, Ex. A: Expert Report on Economic Damages by William O. Kerr, Ph.D (Kerr Report) at 1316, Defendants seek to exclude the Kerr Report based on flaws in Kerr’s methodology which apply equally
to his analysis of the damages caused by both parties, see generally Motion to Exclude Kerr.

10

Ultimately, “[i]f the Court were to permit [Lanard] to proceed against [the Remaining
Defendants] now, it would risk wasting judicial resources and inconsistent judgments
against these parties.”

SCI Northbay Commerce Fund 4, LLC v. SCI Real Estate

Investments, No. 8:11-cv-31-T-24-TGW, 2011 WL 1133898, at *1 (M.D. Fla. Mar. 28,
2011).
Such an approach would be extraordinarily inefficient, setting the stage for
duplicative trials on closely related claims against closely related
defendants. Much of the evidence relating to both sets of claims would be
identical. Redundancies of effort on the part of litigants and the Court would
be large and inevitable, and litigation costs for both sides would be
increased substantially.
Gulfmark Offshore, 2009 WL 2413664 at *3. Although Lanard asserts that a stay would
jeopardize “its right to an expeditious trial of its claim,” see Lanard’s Brief at 8, a delay to
obtain judgment “is not a sufficiently compelling form of prejudice to outweigh the
countervailing considerations set forth herein.” Id.; cf. Lynch, 710 F.2d at 1199 (declining
to exercise its inherent authority to stay an asbestos case where “‘plaintiffs and crucial
witnesses [we]re dying.’”); Brent, 2014 WL 4162770 at *3 (denying a motion to stay where
the plaintiff would have been “tactfully disadvantage[d].”). On the contrary, a stay would
appear to work to Lanard’s benefit “in the form of increased efficiency, less duplication of
effort, lower litigation costs, and less risk of inconsistent judgments.” Gulfmark Offshore,
2009 WL 2413664 at *3 n.7.
For all of the foregoing reasons, this action is due to be stayed pursuant to the
inherent powers of the Court pending resolution of the bankruptcy proceedings against
TRU. However, if the bankruptcy court grants Lanard’s Motion for Relief from Stay, then
Lanard may file a motion to lift the stay. Accordingly, it is hereby ORDERED:

11

1.

This case is hereby STAYED and ADMINISTRATIVELY CLOSED pending
the earlier of the resolution of the bankruptcy proceedings against Toys “R”
Us-Delaware, Inc., or entry of an order granting Lanard’s Motion for Relief
from Stay Pursuant to 11 U.S.C. § 362(d) to Continue Pending Litigation
(Doc. 390-1).

2.

Every 120 days following the date of this Order, the parties shall file a joint
status report concerning the bankruptcy proceedings involving Defendant
Toys “R” Us-Delaware, Inc., as those proceedings relate to this action.

DONE AND ORDERED at Jacksonville, Florida, this 13th day of November, 2017.

lc25
Copies to:
Counsel of Record

12