Luv N Care Ltd v. Jackal International Ltd et al

Filing 76

MEMORANDUM RULING re #28 MOTION for Sanctions filed by Mayborn U S A Inc, Mayborn A N Z Pty Ltd, Jackel International Ltd, Mayborn Group Ltd, Jackel China Ltd, Product Marketing Mayborn Ltd, #38 MOTION to Amend Complaint filed by Luv N Care Ltd and #47 Second MOTION for Sanctions filed by Mayborn U S A Inc, Mayborn A N Z Pty Ltd, Jackel International Ltd, Mayborn Group Ltd, Jackel China Ltd, Product Marketing Mayborn Ltd. Signed by Judge Terry A Doughty on 3/14/2019. (crt,Crawford, A)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
MONROE DIVISION
LUV N’ CARE, LTD.

CIVIL ACTION NO. 18-0534

VERSUS

JUDGE TERRY A. DOUGHTY

JACKEL INTERNATIONAL LIMITED,
ET AL.

MAG. JUDGE KAREN L. HAYES

RULING
Pending before the Court are Plaintiff Luv N’Care, Ltd.’s (“LNC”) Motion to Amend
Complaint [Doc. No. 38] and two Motions for Sanctions [Doc. Nos. 28 & 47] filed by Defendants
Mayborn Group Limited, Jackel International Limited, Mayborn USA, Inc., Jackel China, Ltd.,
Mayborn Anz Pty, Ltd., and Product Marketing Mayborn, Ltd.
For the following reasons, LNC’s Motion to Amend Complaint is GRANTED, Jackel’s
Motion for Sanctions [Doc. No. 28] is DENIED AS MOOT in part and otherwise DENIED, and
Jackel’s second Motion for Sanctions [Doc. No. 47] is DENIED.
I.

ALLEGED FACTS AND PROCEDURAL HISTORY
LNC is a Louisiana corporation with its place of business in Monroe, Louisiana. LNC is a

family-owned business that designs, manufactures, and sells baby products under the “Nuby” brand
name.
Jackel International, Mayborn USA, Mayborn ANZ, and Product Marketing Mayborn, Ltd.,
are wholly-owned subsidiaries of Mayborn Group Limited, a privately held English company,
which is owned by Jake Acquisitions Limited. Jackel China, Ltd., is primarily owned by Product
Marketing Mayborn, Ltd. Jake Acquisitions Limited is ultimately owned by Shanghai Jahwa

United Co. Ltd., which is publicly traded in China. The entity Defendants, which the Court will
collectively refer to as “Jackel,”1 are also in the business of designing, manufacturing, marketing,
and selling baby products. Jackel sells its own products under the brand name Tommee Tippee.
In 2003, Jackel and LNC entered into a distribution agreement under which Jackel served as
the exclusive distributor of LNC products in Great Britain, Ireland, and Gibralter. The 2003
agreement was replaced by a second agreement in 2008, which terminated on April 1, 2010.
The 2008 Agreement included two provisions governing use of proprietary designs or
information:
15(B). Distributor hereby acknowledges and agrees not to copy or utilize any of
LNC's formulae, trade secrets, product design, patents, drawings, business plans,
prototypes, packaging, procedures and methods, [or] any other proprietary designs or
information without LNC's written permission.
19. During the term of this Agreement and continuing after the expiration or
termination hereof, either party shall not disclose or make accessible to anyone, or
make use of the knowledge or information which either party obtains or obtained
during the term of this Agreement with respect to formulae, trade secrets, product
design, patents, drawings, business plans, prototypes, procedures, and methods [or]
any other proprietary designs or information of LNC without the written consent of
the other party.
[Doc. No. 1-6 at ¶¶ 15(B),19].
On May 24, 2010, LNC brought suit against Jackel alleging breach of the 2008 Agreement
by selling certain soft-spout, flip-top, and straw cups with a silicone compression valve (“LNC I”).
That case went to trial, and jury found in favor of LNC and against Jackel on LNC’s claims of
breach of the distribution agreements and the Louisiana Unfair Trade Practices Act (“LUTPA”).

Defendants have referred to themselves collectively as “Mayborn,” while LNC refers to them as “Jackel.”
The Court has no preference, but uses “Jackel” to be consistent with the prior cases involving these parties and to avoid
confusion.
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The May 22, 2013 Judgment provided that Jackel breached the 2003 or 2008 distribution
agreements “with respect to Jackel’s (1) soft spout cups; (2) flip-top cup; and (3) straw cup.” More
specifically, the “Litigated Products” identified in Exhibit A to the Judgment: (1) First Cup; (2)
Kids on the Go Active Cup; (3) Tip It Up Cup; (4) Tip It Up Trainer Cup; (5) Tip It Up
Beaker Cup; (6) Tip It Up Sportster Cup; and (7) Tip It Up Flip Top Cup. [Jackel’s

Exh. 8;

Tr. 93:10-20]; [Doc. No. 1-4]. The jury further found that Jackel’s actions violated the LUTPA.
Id.
Damages in the amount of $754,887.64 were awarded through December 31, 2102, with
pre-judgment and post-judgment interest. LNC was also awarded costs and attorneys’ fees.
Judgment was entered in favor of Jackel and against LNC on Jackel’s Anti-Cybersquatting
Consumer Protection Act claim, and Jackel was awarded damages of $2,000.00.
The Jackel I Court also entered a permanent injunction enjoining Jackel from selling any of
the Litigated Products “as well as any further versions thereof” or other non-litigated products not
in existence at the commencement of the January 2013 trial that are copies and/or colorable
imitations of LNC’s silicone compression valve, i.e., “(1) soft spout cups; (2) flip-top cups; or (3)
straw cups.” [LNC’s Exh. 9].
Shortly before the entry of final judgement in LNC I, on May 3, 2013, LNC filed a second
state court action (“LNC II”) in which LNC alleged that Jackel’s sales of “additional products”
breached the 2008 distribution agreement and violated LUTPA. [Doc. No. 11, Exh. D]. Jackel
removed this lawsuit to federal court. LNC voluntarily dismissed LNC II on August 27, 2013.
Although all parties appealed the judgment in LNC I, the appeal was settled and dismissed
on November 21, 2013. That settlement agreement contained a reservation of rights: “Nor shall
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anything within this Agreement be deemed a settlement or withdrawal of any claims or defenses
between the LNC Parties and the [Jackel] Parties relating to [LNC II ] or the Threatened Hard Top
Cups Action or the products accused therein, all rights with respect to which are expressly reserved
by the parties hereto.” [LNC’s Exhibit 11, p. 3; Tr. 97:10-24, 99:3-5, 99-21-25].
On August 14, 2014, LNC filed a third action (“LNC III”) against Jackel. See Luv N' Care,
Ltd. v. Jackel Int'l, Ltd., No. 2:14-cv-855, 2015 Westlaw 4734701 (E.D. Tex. Aug. 8, 2015). In
that lawsuit, LNC focused on the same hard-top cups, but added patent infringement claims to the
breach and LUTPA claims. The district court dismissed LNC’s breach of the distribution
agreements and LUTPA claims as barred by res judicata. Id. The patent case settled, and the res
judicata decision was never appealed. A final judgement in LNC III issued on December 18, 2015.
On March 23, 2018, LNC filed suit against Jackel in the Fourth Judicial District Court,
Ouachita Parish, Louisiana. LNC’s original Petition alleges breach of the 2008 Agreement and
accuses Jackel of selling products with certain allegedly proprietary features copied from LNC.
Jackel served its original motion for sanctions on LNC on July 25, 2018. [Doc. No. 28-3].
After waiting the requisite twenty-one days, Jackel then filed its Motion for Sanctions. [Doc. No.
28- 2].
On September 12, 2018, LNC attempted to file an amended complaint. [Doc. No. 36].
Because leave of Court was required, LNC filed its Motion to Amend Complaint with the attached
proposed pleading, on September 17, 2018. [Doc. No. 38].
In the proposed amended complaint, LNC dropped the claim that Jackel breached the
agreements by selling “cup products with multiple tops for transitions between nipples and spouts as
a child grows while using the same cup body.”

[Doc. No. 1-2, ¶ 29, Exs. 18–21.]
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The amended complaint changes other claims too, by enumerating fourteen features (instead
of four features), listed as the “LNC Product Designs.” that it allegedly disclosed and shared with
Jackel. [Proposed Amended Complaint, ¶18.] These designs vary from the all-encompassing “cup
with a soft or silicon top” to the unspecific “cup with a sculptured body” and even include a catch-all
claim to “the configurations of LNC’s products.” [Id.].
On September 20, 2018, LNC also filed a memorandum in opposition to Jackel’s original
Motion for Sanctions. [Doc. No. 40].
On October 4, 2018, Jackel filed a reply in support of its original Motion for Sanctions. [Doc.
No. 42].
On November 8, 2018, Jackel filed a second Motion for Sanctions [Doc. No. 47]. Jackel
moves the Court to sanction LNC for filing a meritless lawsuit by dismissing the case with prejudice,
awarding fees and costs, and any other appropriate sanctions. LNC opposed the second Motion for
Sanctions on December 3, 2018. [Doc. No. 57].
On December 5, 2018, the Court held a hearing on the pending Motions for Sanctions. Jackel
presented Steve Parkin as a witness, as well as calling LNC owner, Eddie Hakim (“Hakim”), and
LNC attorneys, Joe D. Guerriero and Bob Chiavello, as witnesses. LNC presented Hakim and its
counsel, Hartwell Morse, as witnesses. At the conclusion of the hearing, the Court set a post-hearing
briefing schedule.
On January 11, 2019, Jackel filed a supplemental memorandum in support of its Motions for
Sanctions. [Doc. No. 73].
On February 1, 2019, LNC filed a supplemental memorandum in opposition to Jackel’s
Motions for Sanctions.
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On February 8, 2019, Jackel filed a supplemental reply in support of its Motions for Sanctions.
This matter is now ripe.
II.

LAW AND ANALYSIS
A. Motion to Amend Complaint
LNC moves the Court for leave to amend its Complaint, at least in part to address the

deficiencies alleged by Jackel.
A plaintiff’s motion to amend its complaint is generally determined pursuant to the standard
of FED. R. CIV. P. 15(a). A trial court’s denial of a motion to amend is reviewed for an abuse of
discretion, but that discretion is limited by the lenient standard in Rule 15(a), which states “that
leave to amend shall be freely given when justice so requires.” Coghlan v. Wellcraft Marine Corp.,
240 F.3d 449, 452 (5th Cir. 2001) (quoting Lowery v. Texas A&M Univ. System, 117 F.3d 242, 24546 (5th Cir. 1997)). This standard is broadly construed and there is a strong presumption in favor
of liberal pleading. See Rolf v. City of San Antonio, 77 F.3d 823, 828 (5th Cir. 1996).
Given the early stage of the litigation, the arguments of counsel, and a review of the
presentation at the hearing, the Court finds that leave should be granted in this instance.
Accordingly, LNC’s Motion to Amend Complaint [Doc. No. 38] is GRANTED.
Jackel’s original Motion for Sanctions is based on LNC’s allegations in its Complaint prior
to amendment. To the extent that arguments are directed toward allegations contained solely in the
original Complaint, the motion [Doc. No. 28] is now DENIED AS MOOT. However, some of
Jackel’s arguments in its original Motion for Sanctions apply to the allegations in the Amended
Complaint as well. The parties had the opportunity to address the allegations in the Amended
Complaint at the hearing and in their post-hearing briefs. Therefore, the Court will consider
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Jackel’s arguments in support of both its original Motion for Sanctions and its Amended Motion for
Sanctions to the extent that they applied to the allegations contained in the Amended Complaint.
B. Motions for Sanctions
Jackel characterizes the narrow issue before the Court as whether LNC had “a good-faith
basis to assert the claims it has articulated in this case, given its knowledge and the history between
the parties?” [Doc. No. 73, p. 6]. Jackel contends that the answer to that query is “no,” while LNC
contends that the answer is “yes.”
In support of its motions, Jackel relies on Federal Rule of Civil Procedure 11 and Louisiana
Code of Civil Procedure Article 863, as this matter was originally filed on state court.
Rule 11(b) provides in relevant part:
By presenting to the court a pleading, written motion, or other paper—whether by
signing, filing, submitting, or later advocating it—an attorney . . . certifies that to the
best of the person’s knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances:
(1)

it is not being presented for any improper purpose, such as to harass, cause
unnecessary delay, or needlessly increase the cost of litigation;

(2)

the claims, defenses, and other legal contentions are warranted by existing law
or by a nonfrivolous argument for extending, modifying, or reversing existing
law or for establishing new law; [and]

(3)

the factual contentions have evidentiary support or, if specifically so identified,
will likely have evidentiary support after a reasonable opportunity for further
investigation or discovery.

....
FED. R. CIV. P. 11(b). Similarly, Article 863 provides:

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T]he signature of an attorney or party shall constitute a certification by him that he
has read the pleading, and that to the best of his knowledge, information, and belief
formed after reasonable inquiry, he certifies all of the following:
(1)

The pleading is not being presented for any improper purpose, such as to
harass, cause unnecessary delay, or needlessly increase the cost of litigation.

(2)

Each claim, defense, or other legal assertion in the pleading is warranted by
existing law or by a nonfrivolous argument for the extension, modification, or
reversal of existing law.

(3)

Each allegation or other factual assertion in the pleading has evidentiary
support or, for a specifically identified allegation or factual assertion, is
likely to have evidentiary support after a reasonable opportunity for
further investigation or discovery.

....
LA. CODE CIV. P. ART. 863(B).
In determining compliance with Rule 11, an attorney is measured under a standard of objective
reasonableness based on the circumstances. Whitehead v. Food Max of Miss., Inc., 332 F.3d 796,
802–03 (5th Cir. 2003) (en banc). The reasonableness of the conduct involved is to be viewed at the
time counsel signed the document alleged to be the basis for the Rule 11 violation, commonly referred
to as the “snapshot rule.” Marceaux v. Lafayette City Par. Consol. Gov’t, 14 F. Supp. 3d 760, 766
(W.D. La. 2014). This rule “ensures that Rule 11 liability is assessed only for a violation existing at
the moment of filing.” Skidmore Energy, Inc. v. KPMG, 455 F.3d 564, 570 (5th Cir. 2006).
The determination of a Rule 11 motion is not a determination of the merits of the action.
Cooter & Gell v. Hartmax Corp., 496 U.S. 384, 396 (1990). “Rather, it requires the determination
of a collateral issue: whether the attorney has abused the judicial process, and, if so, what sanction
would be appropriate.” Id. To succeed on their request for Rule 11 sanctions, Jackel must establish
that LNC lacked a reasonable basis for its allegations at the time that it filed its federal court pleadings.
See Thomas v. Capital Sec. Servs., Inc., 836 F.2d 866, 874 (5th Cir. 1988). This determination is a
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“fact intensive inquiry” that turns on an “assessment of the gravity of the conduct at issue” and is
measured by an objective standard of reasonableness under the circumstances. Id. at 872-73; see
also Smith v. Our Lady of the Lake Hosp.,960 F.2d 439, 444 (5th Cir. 1992) (reversing the imposition
of Rule 11 sanctions, although the Court “doubted the merits of Smith’s suit,” and finding that “the
attorneys’ investigation, while not perfect, was reasonable under the circumstances”).
Likewise, the case law interpreting Article 863 makes clear that litigants and their counsel
must make an objectively reasonable inquiry into the facts and law supporting the petition or other
pleading. See Graves v. Fields, 35,411 (La. App. 2d Cir. 12/19/01), 803 So.2d 392. Article 863 is
intended only for exceptional circumstances and is not to be used simply because parties disagree as
to the correct resolution of a legal matter. Caldwell v. Griggs, 40,838 (La. App. 2d Cir.3/8/06), 924
So.2d 464 (citing Green v. Wal-Mart Store No. 1163, 96-1124 (La. App. 4th Cir.10/17/96), 684 So.2d
966). “Only when the evidence is clear that there is no justification for the legal right exercised should
sanctions be considered.” Woods v. Woods, 43,182 (La. App. 2 Cir. 6/11/08), 987 So. 2d 339, 347,
writ denied, 2008-2256 (La. 11/21/08), 996 So. 2d 1110.
In this case, the entirety of Jackel’s oral and written arguments and presentation at the hearing
attack the merits of LNC’s case, either rejecting LNC’s claims as “implausible” or by relying on the
doctrine of res judicata. In response, LNC has provided affidavits, testimony, and other evidence
from its counsel and principal, Hakim, to support the filing of the Petition and further to show that
they have amended the original petition to address Jackel’s allegations and concerns. LNC presented
testimony from three of its attorneys to show the inquiry made prior to the filing of the lawsuit. LNC
also presented testimony from Hakim to support LNC’s factual allegations the company recently
discovered that one or more of the Jackel Parties are selling cups and tumblers that have either copied
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or adopted colorable imitations of one or more of additional LNC product designs and/or used
compression to remove liquid therefrom, all in violation of the 2003 and 2008 Distributorship
Agreements, that they were not aware of the allegedly Breaching Products during the pendency of the
prior lawsuits, and had no basis to believe that Jackel was selling additional products that included
one or more of LNC’s product designs.
While the parties have made extensive arguments and presented evidence about the different
products produced by Jackel prior to the 2003 agreement and the various features of the products at
issue in the current litigation, all of these arguments go to the very merits of the litigation. To rule
in Jackel’s favor at this stage, the Court would have to make extensive factual and legal
determinations before any substantive motion has been filed or any discovery conducted. It may
well be that Jackel has the right to seek and, perhaps, even obtain a judgment in its favor under a Rule
12(b)(6) or Rule 56 analysis. However, the Court cannot and will not make such a determination at
the outset of the litigation. Based on the evidence and testimony presented, the Court cannot find, at
this stage, that LNC abused the judicial process and take the extraordinary action of dismissing LNC’s
actions with prejudice. If Jackel ultimately prevails on one or more of LNC’s claims, it may certainly
re-urge its motion for sanctions, but the Court will not order sanctions at this time. Therefore,
Jackel’s Motions for Sanctions are DENIED.
On the other hand, contrary to LNC’s arguments, the Court finds that it is not entitled to
attorneys’ fees and costs. Given the history of the litigation between the parties and prior rulings in
state and federal court, Jackel has a reasonable basis for pursuing the Motions for Sanctions. The
Court finds only that such sanctions are not appropriate at this time.
III.

CONCLUSION
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For the foregoing reasons, LNC’s Motion to Amend Complaint [Doc. No. 38] is GRANTED,
Jackel’s Motion for Sanctions [Doc. No. 28] is DENIED AS MOOT in part and otherwise DENIED,
and Jackel’s second Motion for Sanctions [Doc. No. 47] is DENIED.
MONROE, LOUISIANA, this 14th day of March, 2019.

TERRY A. DOUGHTY
UNITED STATES DISTRICT JUDGE

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