Yeti Coolers, LLC v. Beavertail Products, LLC et al

Filing 27

ORDER GRANTING IN PART AND DENYING IN PART 9 Motion to Dismiss ; MOOTING 12 Motion for Hearing. Case TRANSFERRED to the United States District Court for the District of Minnesota. Signed by Judge Robert Pitman. (dm)[Transferred from Texas Western on 8/13/2015.]

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
YETI COOLERS, LLC,

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Plaintiff,
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V.
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BEAVERTAIL PRODUCTS, LLC,
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INNOVATIVE OUTDOOR SOLUTIONS, INC., §
RHINO, INC., OTTER OUTDOORS, LLC,
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WAVE ARMOR, LLC,
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Defendants.
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1-15-CV-415 RP

ORDER
Before the Court are Defendants’ Motion to Dismiss, or in the Alternative, to Transfer to the
District of Minnesota, filed June 8, 2015 (Clerk’s Dkt. #9); and the responsive pleadings thereto,
including Plaintiff’s Request for Hearing on Defendants’ Motion to Dismiss, filed June 22, 2015
(Clerk’s Dkt. #12). After reviewing the parties' pleadings, relevant case law, as well as the entire
case file, the Court issues the following order.
I. BACKGROUND
Plaintiff YETI Coolers, LLC (“YETI”) brings this action against Beavertail Products, LLC
(“Beavertail”), Beavertail’s parent company Innovative Outdoor Solutions, Inc. (“IOS”), Rhino, Inc.
(“Rhino”), Otter Outdoors, LLC (“Otter”), and Wave Armor, LLC (“Wave Armor”). YETI describes
itself as having continuously engaged in the development, manufacture, and sale of premium,
heavy-duty coolers for almost ten years. According to YETI, its trademarked designs are a wellknown indicator of quality and have become famous. (Compl. ¶ 14). More specifically, YETI
alleges its Tundra cooler has a number of distinctive ornamental and functional features which
YETI has taken steps to legally protect by way of utility and design patents. (Id. ¶¶ 15-23).
YETI alleges Defendants have advertised and offered for sale coolers which are confusingly
similar to YETI’s designs without authorization from YETI. (Id. ¶¶ 24-30). YETI states it has

informed Defendants of their allegedly infringing conduct by letter dated February 20, 2015 from
YETI’s counsel to Beavertail. According to YETI, Defendants have nonetheless refused to cease
marketing, offering for sale and selling the allegedly infringing coolers. (Id. ¶¶ 31-33).
Plaintiff asserts claims of trade dress dilution under Texas law; trade dress infringement,
unfair competition, false designation of origin, trade dress dilution under the Lanham Act; patent
infringement; common law trademark infringement, common law unfair competition; common law
misappropriation; and unjust enrichment. Plaintiff seeks injunctive relief, as well as monetary
damages, attorney’s fees and costs.
Defendants have now moved to dismiss this action in favor of an action pending in federal
district court in Minnesota, or alternatively to transfer this action to the Minnesota court. Plaintiff
has filed a response, as well as a motion seeking a hearing on Defendants’ motion.
II. APPLICABLE LAW
“Courts in the Fifth Circuit generally follow a ‘first-filed rule’ in deciding which Court should
maintain jurisdiction over claims that arise out of the same subject matter but are pressed in
different suits.” Igloo Prods. Corp. v. The Mounties, Inc., 735 F. Supp. 214, 217 (S.D. Tex. 1990).
“Under the first-to-file rule, 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.” International Fid. Ins. Co. v. Sweet Little Mexico Corp., 665 F.3d 671, 677-78 (5th Cir.
2011) (quoting Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999)). The
rule is “grounded in principles of comity” under which federal courts have recognized “courts of
coordinate jurisdiction and equal rank [should] exercise care to avoid interference with each others’
affairs.” Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th Cir. 1997). See W. Gulf Mar.
Ass'n v. ILA Deep Sea Local 24, 751 F.2d 721, 729 (5th Cir. 1985) (noting circuit recognizes
principles underlying first-filed rule). The three primary concerns of the first-filed rule are to “avoid

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the waste of duplication, to avoid rulings which may trench upon the authority of sister courts; and
to avoid piecemeal resolution of issues that call for a uniform result.” Sweet Little Mexico, 665 F.3d
at 678 (quoting Sutter Corp. v. P & P Indus., Inc., 125 F.3d 914, 917 (5th Cir.1997)).
Application of the first-filed rule is discretionary. Cadle, 174 F.3d at 603 (citing Kerotest
Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183-84 (1952)). In determining whether to
dismiss an action, the court must examine: (1) whether the two pending actions are so duplicative
or involve substantially similar issues that one court should decide the issues; and (2) which of the
two courts should resolve the case. Sutter, 125 F.3d at 920. See Sweet Little Mexico, 665 F.3d
at 678 (rule does not require identical cases, crucial inquiry is one of “substantial overlap”).
However, “[o]nce the likelihood of substantial overlap between the two suits has been
demonstrated, it is no longer up to the second-filed court to resolve the question of whether both
should be allowed to proceed.” Cadle, 174 F.3d at 605-06. Instead, “the proper course of action
[is] for the [second-filed] court to transfer the case” to the first-filed court. Id. at 606. It is then the
responsibility of the first-filed court to decide “whether the second suit filed must be dismissed,
stayed, or transferred and consolidated.” Sutter, 125 F.3d at 920.
III. DISCUSSION
The parties agree Beavertail, its parent company IOS, and Rhino, the manufacturer of the
allegedly infringing coolers, filed a declaratory judgment against YETI on March 5, 2015 in the
District of Minnesota (“Minnesota Action”). Defendants maintain that the Minnesota Action is the
“first-filed case” and thus this case should either be dismissed or transferred to Minnesota.
Plaintiff argues transfer is inappropriate because the “first-filed rule” is not an absolute rule.
Plaintiff first contends the “rule” does not apply in this case because the Minnesota Action is a
declaratory judgment action and was filed preemptively so as to prevent YETI from litigating in its

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preferred forum.1 However, the filing of a declaratory judgment action in a court with jurisdiction
to hear the dispute is “not in itself improper anticipatory litigation.” Sherwin-Williams Co. v. Holmes
Cnty., 343 F.3d 383, 391 (5th Cir. 2003) (addressing propriety of dismissal of federal declaratory
judgment action in favor of pending state court action). Plaintiff points out “[a] district court may
consider a party's intention to preempt another's infringement suit when ruling on the dismissal of
a declaratory action.” Micron Tech., Inc. v. Mosaid Tech., Inc., 518 F.3d 897, 904 (Fed. Cir. 2008).
See also In re Foundations Worldwide, Inc., 542 F. App'x 998, 999 (Fed. Cir. 2013) (noting courts
may consider whether first filed action was anticipatory suit). However, the very case cited by
Plaintiff also states“[t]he considerations affecting transfer to or dismissal in favor of another forum
do not change simply because the first-filed action is a declaratory action.” Micron Tech., 518 F.3d
at 904 (quoting Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 938 (Fed. Cir. 1993)).
Defendants correctly note the cases on which Plaintiff relies suggest the appropriate inquiry
is whether the party filing the declaratory action was acting inequitably and intending to preempt
another party’s suit. See In re Foundations, 542 F. App'x at 999 (noting district court dismissed
first-filed case because of petitioners' “inequitable conduct”); Serco Servs. Co., L.P. v. Kelley Co.,
51 F.3d 1037, 1040 (Fed. Cir. 1995) (“we cannot say” district court abused its discretion in
considering intent of party in filing preemptive suit). Defendants maintain their filing of the
Minnesota Action was not for an improper purpose, but rather a response to YETI’s February 2015
letter. The letter demanded that Beavertail, by March 6, 2015, provide written confirmation that it
had ceased manufacture and sale of allegedly infringing coolers and a full accounting of all prior

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Plaintiff also suggest in a supplemental filing that forum selection clauses included in contracts entered into
in 2009 and 2012 by YETI and Rhino governs venue in this case. According to YETI, the contracts were executed to
explore the possibility of Rhino manufacturing coolers for YETI and mandated venue in Texas for resolution of disputes
arising out of or related to the contracts. YETI admits it has not asserted a breach of contract claim, but states
“investigation into such a claim is ongoing.” (Plf. Supp. at 2). The Court notes, however, that YETI affirmatively states
in its response to Defendants’ motion that “[t]his dispute revolves exclusively around Defendants’ infringement of YETI’s
intellectual property. (Plf. Resp. at 1). Moreover, the contracts did not involve any other defendant. The Court thus
declines to find the forum selection clauses mandate venue over this action in Texas.

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sales. (Def. Mot. to Dism. Ex. A-1). According to Defendants, they believe YETI’s intellectual
property claims are likely invalid and filed the Minnesota Action as protection against YETI’s
improper demands. (Def. Mot. to Dism. at 3; Reply at 8). Plaintiff points to nothing, other than the
timing of Defendants’ filing of the Minnesota Action, to show Defendants have acted inequitably.
The Court thus does not find Defendants’ conduct weighs in favor of denying their motion. See
Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d 403, 407 (5th Cir. 1971) (first-filed rule applies absent
“compelling circumstances”).
Plaintiff also contends the rule is inapplicable because the Minnesota Action does not
involve the identical defendants or causes of action at issue in this action. Plaintiff has filed its
answer in the Minnesota Action, and also asserted counterclaims against Beavertail, IOS and
Rhino. (Def. Mot. to Dism. Ex. A-5). The counterclaim pleading is virtually identical to the
complaint filed by YETI in this action, with two main differences. Namely, YETI does not assert
affirmative claims against Wave Armor or Otter. Nor does YETI assert claims for trade dress
dilution under Texas law, for common law misappropriation or for unjust enrichment.
As an initial matter, the Court notes identity of issues and defendants is not required,
rather the crucial inquiry is one of “substantial overlap.” Sweet Little Mexico, 665 F.3d at 678.
Although there are some differences, the two cases involve three identical defendants. And,
according to Plaintiff’s complaint, the two additional defendants named in this action share the
same principal place of business as the other defendants. (Compl. ¶ 7).
In addition, the core issue in both cases is YETI’s contention that it is entitled to patent,
trademark and trade dress protection for its Tundra coolers. See Needbasedapps, LLC v. Robbins
Research Int'l, Inc., 926 F. Supp. 2d 907, 914 (W.D. Tex. 2013) (finding substantial overlap where
cases involved “the same fight over who owns the applications and related intellectual property”).
See also Sweet Little Mexico, 665 F.3d at 678 (proper factors to consider in deciding if substantial
overlap exists include whether core issue was the same). Also significant in this case is the fact
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that YETI sought transfer of the Minnesota Action to Texas, but the Minnesota court declined to
do so. (Notice of Order, Clerk’s Dkt. #24). Retention of this case in Texas would thus run afoul
of the purposes of the first-filed rule – to avoid interference with another court’s authority, the waste
of duplication and piecemeal resolution of issues. Sweet Little Mexico, 665 F.3d at 678.
Plaintiff finally suggests this Court should reject Defendants’ request to transfer this action
because the factors governing transfer under 28 U.S.C. § 1404(a) weigh in favor of keeping this
action in Texas. See 28 U.S.C. § 1404(a) (court may transfer case for convenience of parties and
witnesses). Plaintiff’s argument urges a misapplication of the first-filed rule under Fifth Circuit
precedent. As set forth above, once substantial overlap is found between the two cases, the
proper course of action for the second-filed court is to transfer the case to the first-filed court. See
Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1161 n.28 (5th Cir. 1992)
(absent compelling circumstances, first-filed court should be one to decide whether it will try case).
As the Fifth Circuit has made clear, the ‘first-to-file rule’ not only determines which court may
decide the merits of substantially similar cases, but also establishes which court may decide
whether the second suit filed must be dismissed, stayed or transferred and consolidated.” Sutter
Corp., 125 F.3d at 920. Thus, as our sister court has stated “the Fifth Circuit made clear that it is
the first-filed court, not this court, that should make the § 1404(a) determination.” Twin City Ins.
Co. v. Key Energy Servs., Inc., 2009 WL 1544255, at *6 (S.D. Tex. June 2, 2009). Accordingly,
the Court concludes this action should be transferred to the District of Minnesota.
III. CONCLUSION
The Court hereby GRANTS IN PART Defendants’ Motion to Dismiss, or in the Alternative,
to Transfer to the District of Minnesota (Clerk’s Dkt. #9), TRANSFERS this action to the United
States District Court for the District of Minnesota, and DENIES all other requested relief. The Court
further DISMISSES AS MOOT Plaintiff’s Request for Hearing on Defendants’ Motion to Dismiss

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(Clerk’s Dkt. #12).
SIGNED on August 12, 2015.

ROBERT L. PITMAN
UNITED STATES DISTRICT JUDGE

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