Beach Mart, Inc. v. L&L Wings, Inc.

Filing 302

ORDER granting 286 Motion to Strike. L&L's Supplemental Expert Report and its accompanying exhibit [DE-287-1] are struck and are not admissible. Signed by Senior Judge James C. Fox on 1/27/2016. (Edwards, S.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
NORTHERN DIVISION
No. 2:11-CV-00044-F
BEACH MART, INC.,
Plaintiff

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v.
L&L WINGS, INC.,
Defendant.

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L&L WINGS, INC.,
Counterclaimant
v.
BEACH MART, INC.,
Counter Defendant.

L&L WINGS, INC.,
Plaintiff
v.
SHEPARD MORROW, SUPER WINGS, LLC,
and BEACH MART, INC.,
Defendants.

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ORDER

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This matter is before the court on Beach Mart's Motion to Strike Untimely Supplemental
Expert Report and to Exclude Belatedly-Produced Hearsay Evidence [DE-286]. The matter has
been fully briefed and is ripe for ruling. For the reasons stated herein, the motion is ALLOWED.

I.

PROCEDURAL AND FACTUAL HISTORY
The court will not revisit the case's entire history given its extensive treatment in past

orders. Instead, the court highlights the procedural history and facts relevant to the present

motion. The court previously divided this case into two phases. Beach Mart's motion deals with
a document disclosed from the first phase of this matter. The first phase concerns what have been
dubbed the Morrow Issues. See Scheduling Order of October 31,2014 [DE-241] at 1-2. The
Morrow Issues are
(1) the duration of Morrow's right, title, and interest in the Wings trademark, if
any-particularly as to (a) when Morrow first acquired that right, title, and
interest; and (b) when, if ever, that right, title, and interest ended; and
(2) the extent of Morrow's right, title, and interest in the Wings trademark, if
any-in particular, the extent of that right, title, and interest (a) when Morrow
first acquired his right, title, and interest; (b) during the time period lasting
from when Morrow entered any agreement with L&L Wings concerning the
Wings trademark until the end of that agreement; and (c) when Morrow
transferred any remaining right, title, and interest he possessed in the Wings
trademark to Super wings.
!d. According to the court's scheduling order, fact discovery on the Morrow Issues was to open

on November 3, 2014, and close on February 6, 2015. See id. at 2. Expert disclosures were due
on February 20, 2015, with rebuttals to follow on March 13, 2015. See id. Expert discovery was
to close entirely on April17, 2015. !d.
On March 12, 2015, one ofL&L's attorneys discovered an article (hereinafter the
"Article") from the March 24, 1978 issue of Men's Wear, which Article contained information
potentially relevant to the Morrow Issues. See Ladd Decl. [DE-296-1] '1[5. The next day, the
attorney retrieved and made a copy of the Article. See id. '1['1[7-8. Just under a month later, on
April 7, 2015, L&L showed the Article to its opinion witness, 1 John Kennard. See Supplement to
Opinion Witness Report of John V.O. Kennard [DE-287-1] (hereinafter the "Supplemental
Report"). On that same day, about a week and a half before the close of expert discovery and two
days before Kennard's deposition, L&L sent Beach Mart a supplemental opinion witness report.
1

Opinion witness is another term used to describe an expert witness.
2

The Supplemental Report is only two paragraphs and states that John Kennard relied on
the Article in reaching his opinion that "Morrow's rights in the WINGS trademark, if any, were
de minimis, as the [attached] article evidences non-use ofthe WINGS mark." See id. at 3. The
Article, which makes up the remaining three pages of the Supplemental Report, appears to be an
interview with Martin Morrow, the former Chief Executive Officer of Piedmont Industries. See
id. at 6. Piedmont Industries had previously registered the Wings trademark with the United
States Patent and Trademark Office. The Articl~e contains an unattributed statement that "[t]he
Wings name is still registered but not used currently." See id.
I

Beach Mart argues that the Article is inadmissible either (1) because it is untimely, or
(2) because it is hearsay. L&L argues that the Article should be admitted (1) because it was filed
before the end of discovery and any delay was justified or harmless; and (2) because any hearsay
falls under either the ancient documents exception or the residual hearsay exception.

II.

LEGAL STANDARDS
A. Timeliness and Supplementation Requirements Under Federal Rules 26 and 37
Rule 26(e) of the Federal Rules of Civil Procedure requires that parties timely

supplement and correct their discovery disclosures. See Fed. R. Civ. P. 26(e). As it pertains to
expert or opinion witness reports, "a party has a duty to supplement a materially incomplete or
incorrect report or deposition testimony by the time pretrial disclosures are due under
Rule 26(a)(3)." See AMEC Env 't & Infrastructure, Inc. v. Structural Assocs., Inc., No. 7:13-CV21-BO, 2015 WL 1000766, at *2 (E.D.N.C. Mar. 5, 2015); see also Fed. R. Civ. P. 26(e)(2). If a
party fails to supplement its disclosures, Rule 37(c)(1) provides courts with various sanction
powers to remedy the violation, unless the violation was substantially justified or harmless. See

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Fed. R. Civ. P. 37(c)(l). Courts have broad discretion to determine whether a Rule 26(e)
violation was justified or harmless and to determine a remedy for that violation. See Silicon
Knights, Inc. v. Epic Games, Inc., No. 5:07-CV-275-D, 2012 WL 1596722, at *2 (E.D.N.C. May
7, 2012). In exercising this discretion, courts look to the following factors:
(1) the surprise to the party against whom the evidence would be offered;
(2) the ability of that party to cure the surprise;
(3) the extent to which allowing the evidence would disrupt the trial;
(4) the importance ofthe evidence; and
(5) the nondisclosing party' s explanation for its failure to disclose the evidence.
Id (quoting S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir.
2003)).

B. Hearsay, the Ancient Documents Exception, and the Residual Exception
Hearsay-an out of court statement offered to prove the truth of the matter asserted-is
not admissible unless it falls under an exception. See Fed. R. Evid. 801(c), 802. Ancient
documents provide one such exception for hearsay contained in documents that are at least
twenty years old "and whose authenticity is established." Fed. R. Evid. 803(16). Documents and
statements sometimes contain multiple layers of hearsay, in which case, each layer must fall
under an exception in order to be admissible. See Fed. R. Evid. 805.
The rules also contain a residual hearsay exception, which creates a general exception for
hearsay that otherwise does not have an exception in the rules. Fed. R. Evid. 807(a). Such
hearsay must meets four conditions to qualify:
(1) the statement has equivalent circumstantia( guarantees oftrustworthiness;
(2) it is offered as evidence of a material fact;
(3) it is more probative on the point for which it is offered than any other
evidence that the proponent can obtain through reasonable efforts; and
(4) admitting it will best serve the purposes of these rules and the interests of
justice.
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I d. A hearsay statement will only be admissible under the residual exception if the proponent

gives "reasonable notice of the intent to offer the statement and its particulars, including the
declarant's name and address, so that the party has a fair opportunity to meet it." Fed. R. Evid.
807(b). This exception should be used very rarely. See Bouygues Telecom, SA. v. Tekelec, 473 F.
Supp. 2d 692, 696 (E.D.N.C. 2007). Additionally, "the proponent of the statement bears a heavy
burden to come forward with indicia of both trustworthiness and probative force ... ."See
United States v. Washington, 106 F.3d 983, 1001-02 (D.C. Cir. 1997). At least one court has held
that "newspaper articles rar~ly satisfy the requirements of the residual-hearsay exception."
Planned Parenthood Se., Inc. v. Strange, 33 F. Supp. 3d 1381, 1385 (M.D. Ala. 2014).

III.

DISCUSSION
A. The Article will be struck because it is untimely without a justifiable
explanation.
Fact discovery closed on February 6, 2015. See Scheduling Order [DE-241] at 2. Expert

disclosures were due on February 20, 2015, with rebuttals to follow on March 13, 2015. See id.
On March 23, 2015, ten days after rebuttals were due, L&L's attorneys found a copy of the
Article, the existence of which they discovered only one day before. See Ladd Decl. [DE-296-1]
~~

5, 7-8. L&L showed the Article to its opinion witness, Mr. John Kennard, almost a month

later, and just two days before his deposition. See Kennard Dep. [DE-287-2] at 220:23-221:1.
L&L admits that it did not conduct the search leading to the Article until March 12, 2015,
more than a month after fact discovery closed. See Ladd Decl. [DE-296-1]

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5. Additionally,

L&L gives no explanation for why it did not conduct the search earlier. On the other hand,
despite its objections to the Article, Beach Mart acknowledges that there is no surprise here.

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Furthermore, there is no disruption to trial. However, the court cannot find that the Article's late
arrival is substantially justified or harmless.
"Courts distinguish 'true supplementation' (e.g., correcting inadvertent errors or
omissions) from gamesmanship ... ."Gallagher v. S. Source Packaging, LLC, 568 F. Supp. 2d
624, 631 (E.D.N.C. 2008). Here, as in Gallagher, L&L was not supplementing to correct an
inadvertent error or omission, nor do they claim to do so. Instead, L&L was using the
Supplemental Report to shoehorn in a piece of evidence that L&L's counsel sought out after fact
discovery had already closed. While L&L may not have engaged in gamesmanship by trying to
spring surprising new information on Beach Mart, L&L offers no explanation for the late
disclosure of the Article other than that it was discovered late. This seemingly innocent tautology
does not justify the Article's tardiness. Indeed, as shown in Kennard's deposition, he had no idea
why the document was not provided to him until April 7. See Kennard Dep. [DE-287-2] at
220:23-221:25. As in Gallagher, L&L "seeks to contort this sensible rule into the unacceptable
rule that a party may permissibly submit a new expert report until pretrial disclosures are due or
until 30 days before trial so long as the party characterizes the new report as a supplementation."
568 F. Supp. 2d at 631. To otherwise admit the Article "would promote gamesmanship and
delay." Id. (citing Fed. R. Civ. P. 1; Tucker v. Ohtsu Tire & Rubber Co., 49 F. Supp. 2d 456, 460
(D. Md. 1999)). On this basis, Beach Mart's Motion to Strike Untimely Supplemental Expert
Report and to Exclude Belatedly-Produced Hearsay Evidence [DE-286] is ALLOWED. The
Supplemental Report [DE-287-1] is hereby stricken along with the attached Article.

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B. The Article must be struck as it also contains inadmissible hearsay.
In addition to its timeliness arguments, Beach Mart argues that the Article should be
excluded as hearsay. Though conceding that the Article is an ancient document under Federal
Rule of Evidence 803(16), Beach Mart contends that the Article contains multiple levels of
hearsay and that the secondary layers of hearsay do not fall under a hearsay exception.
Specifically, Beach Mart argues that the statement, "The Wings name is still registered but not
used currently," (hereinafter the "Statement") is not attributed to the Article's author-whoever
the author might be-and is thus at least double if not triple hearsay. L&L counters by arguing
that there is no double hearsay and, even ifthere is double hearsay, that the double hearsay
restrictions "do[] not arise in the context of a newspaper or periodical unless the declarant is
someone other than the article's author." L&L's Mem. Law Opp. [DE-296] at 9. L&L argues
that the Statement's declarant was the author of the Article. See id Alternatively, L&L argues
that the Statement is admissible under the residual hearsay exception.

i.

Double Hearsay

Courts differ on whether a separate hearsay exception is necessary for each instance of
double or triple hearsay when those instances are contained in an ancient document. In L&L's
comer is a lone case from the Eastern District of Pennsylvania. See Langbord v. US. Dep 't of

Treasury, No. 06-5315, 2011 WL 2623315 (E.D. Pa. July 5, 2011). The Langbord court rejected
the argument that a second level of hearsay in an ancient document had to fall within a separate
hearsay exception. See id at *17. In support of its holding-that an ancient document need only
be authenticated for any hearsay therein to be admissible-the Langbord court cited to Professor
Michael H. Graham's supplement in Wright & Miller's Federal Practice and Procedure, which

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stated that a contradictory case, Hicks v. Charles Pfizer & Co. Inc., 466 F. Supp. 2d 799 (E.D.
Tex. 2005), was wrong:
The text, underlying purpose, and rationale ofRule 803(16) each supports a broad
interpretation. Rule 80[3](16) simply says, "statements in a document," not
"statements in a document made on personal knowledge of the documents
creator." Thus, a newspaper article over twenty years old reporting any event is
admissible even if the article states that information was received from third
parties, i.e., the context of the article is not solely within the personal knowledge
of the creator or creators of the document. Realistically, any requirement that the
proponent of the ancient document must establish the personal knowledge of the
creator of the document as to all matters contained therein would effectively
emasculate Rule 803(16)'s utility as it did in Hicks. Hicks is thus incorrect both as
a textual matter and a matter of policy and should not be followed.
Id (quoting 30C Kenneth W. Graham, Jr. & Michael H. Graham, Federal Practice and
Procedure Evidence§ 7057 (2014 ed.)). However, Langbord seems to be the lone fighter in

L&L' s corner.
In Beach Mart's corner is a mob of cases holding that instances of double or triple
hearsay in ancient documents must still fall under a hearsay exception for each instance of
hearsay. See United States v. Demjanjuk, 367 F.3d 623, 631 (6th Cir. 2004); United States v.
Hajda, 135 F.3d 439, 443-44 (7th Cir. 1998); Emhart Indus., Inc. v. Home Ins. Co., 515 F. Supp.

2d 228,268 (D.R.I. 2007); Ruth v. A.D. Smith Corp., 615 F. Supp. 2d 648, 651 n.2 (N.D. Ohio
2005); see also Escalante v. Clinton, 386 F. App'x 493, 498-99 (5th Cir. 2010) (finding that
translated statements did not qualify as hearsay within hearsay, but conducting the analysis when
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it applied to an ancient document); Kesey, LLC v. Francis, No. CV. 06-540-AC, 2009 WL
909530, at *28-29 (D. Or. Apr. 3, 2009) (holding that statements not attributed to author of
ancient document article, that were offered for the truth of the matter asserted, and that did not
fall into a hearsay exception were inadmissible).

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The requirement that a separate hearsay exception apply to each layer of hearsay is
logical. As outlined in another unpublished case from the Eastern District of Pennsylvania, one
that held the opposite of Langbord, ancient documents are excepted from the rule against hearsay
because they typically "bear certain indicia of trustworthiness that favor admissibility." See

United States v. Stelmokas, Civ. A. No. 92-3440, 1995 WL 464264, at *5 (E.D. Pa. Aug. 2,
1995)? However, merely because ancient documents bear certain indicia oftrustworthiness does
not mean additional layers will bear the same indicia. In contrast to Langbord, the Stelmokas
court held that the multiple hearsay requirement of Rule 805 must still apply to ancient
documents. See id at *6. The Stelmokas court held so (1) because Federal Rule of Evidence 805
would otherwise "be rendered superfluous," and (2) because ''there is no guarantee that a hearsay
statement contained in the document is accurate." Id 3 The Fourth Circuit does not appear to have
taken a position on whether multiple layers of hearsay in an ancient document must each fall
under a hearsay exception. However, this court finds the logic of the aforementioned cases to be
persuasive. Therefore, the court holds that any instances of double or triple hearsay within the
Article must fall within a hearsay exception.
Unfortunately, merely applying the logic of Stelmokas and the weight of the case history
does not end the dispute. L&L argues that the Statement is not a second level of hearsay because
the declarant is the author of the Article. However, as Beach Mart notes, attribution of the
Article, and the Statement in particular, is not so simple. The Article is labeled as "From the
2

Those indicia include (1) age, meaning that the document was drafted before any of the events
leading to litigation arose, thus precluding a litigious motive in the document's creation; (2) a writing,
minimizing the danger of diluting or changing the information as it is communicated through time; and
(3) temporal accuracy, meaning that information written at the time of the event is more likely to be
accurate than the declarant's memory. Id.
3
While Stelmokas precedes Hicks, the court finds its logic more compelling.
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Publisher," and appears to be based off an interview with Martin Morrow of Piedmont Industries.
See Article [DE-287-1] at 6. The Article does not indicate whether the publisher himself

conducted the interview with Mr. Morrow or whether a staffer at Men's Wear did so. Indeed, the
Article does not list an author. However, regardless of who conducted the interview, more
problematic is attribution of the Statement. It is unclear whether the Statement was made by the
interviewer or interviewee. Given (1) the interview nature of the Article, (2) the lack of
attribution, and (3) additional trustworthiness concerns-discussed below with respect to the
residual hearsay exception-the court finds that the Statement is not attributable to the Article's
declarant. Therefore, the Statement is double hearsay and must fall under a separate exception.
The only exception that would apply, as argued by L&L, is the residual hearsay exception.

ii.

Residual Hearsay Exception

L&L makes four arguments in support of admitting the Statement under the residual
hearsay exception, specifically as those arguments pertains to the trustworthiness prong of the
exception: (1) "the statement was made before any motive to fabricate could arise;" (2) Piedmont
and Martin Morrow had an incentive to correct any inaccuracy because the statement could be
construed as against their interests; (3) the question of whether Piedmont was using the Wings
mark is binary; and (4) the Article was contemporaneous with Piedmont's alleged non-use of the
Wings mark. See L&L's Mem. Law Opp. [DE-296] at 10-11. These are also the factors listed in
Hicks, with one critical omission: independent corroboration from other newspapers all stating
the same information. See Hicks, 466 F. Supp. 2d at 809.
With the exception of the first factor, which otherwise duplicates the work that would be
done by the ancient documents exception, there are several flaws in L&L' s reasoning. To help

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illustrate these flaws, the court compares the trustworthiness of the Statement and Article to the
documents admitted in Hicks under the residual exception. The documents at issue in Hicks were
four newspaper articles linking Pfizer, the defendant drug company, to doses of a vaccine that
allegedly led to the plaintiffs brain tumors. See id. at 804.

a. Incentive to Correct
In Hicks, the court found that the defendant drug company had incentive to correct any
inaccuracies in the newspaper articles as the vaccine project "was a high-profile, public health
campaign designed to eradicate a devastating illness." Id. at 808. Additionally, "the relevant
statements were printed in newspapers of general circulation, so it is unlikely that inaccuracies
would have gone unnoticed in the community." Id. at 809.
Here, the Statement is not part of a high-profile national campaign, nor something
necessarily critical to the business's activities at that time. Indeed, the Statement is not even
ancillary to the Article's discussion, which concerns the growth of men's clothing sales. See
Article [287-1] at 6. Moreover, in contrast to Hicks, there is no evidence that Men's Wear was a
widely-circulated magazine, much less a newspaper of general circulation. Because of these
factors, the incentive to correct is much smaller here than it was in Hicks.

b. Binary Event
In Hicks, the event in question was a binary event. See Hicks, 466 F. Supp. 2d at 809.
That is, it either happened or it did not. The binary event-the administration of a vaccine-was
concrete and discrete. It was concrete in that receiving the vaccine was physically observable,
and discrete in that it occurred within a relatively small window of time. Those attributes should
be important in determining whether an event was binary or not.

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Here, in contrast to Hicks, abandonment of a mark is an abstract inquiry. Whether a mark
has been abandoned depends on the mark holder's intent to use the mark in the future. See
George & Co. LLC v. Imagination Entertainment Ltd., 575 F.3d 383, 400 (4th Cir. 2009). Intent

is not physically observable. The inability to observe intent weighs strongly against finding that
this was a binary event. Instead of merely relying on regular abandonment, L&L looks to the
presumption of abandonment, which does not require intent but only three years of non-use. See
id. at 400-01. But three years of non-use is not comparable to the single administration of a

vaccine. Three years of non-use is longer in time by several orders of magnitude than the Hicks
event, which spanned a single instance on a single day. Because of this, accurate observation of
three years of non-use requires more exhaustive and extensive observation than the provision and
administration of a vaccine, which is readily observable.
L&L's attempt to use the Statement in the Article as a basis for claiming three years of.
non-use teeters between tenuous and illusory. The statement should, at very least, be
commensurate in scope to the "binary" event. This single Statement, however, falls far short.
Binary, as discussed above, implies a simple yes or no answer based on a discrete and concrete
observation. Three years of non-use requires much more and thus can hardly be called binary.

c. Contemporaneity
In Hicks, the newspaper articles were written contemporaneous to the administration of
the vaccines, a discrete event. Here, L&L attempts to give the impression of the same
contemporaneity but stretches the meaning of the word to its limits. L&L claims that the Article
was contemporaneous to Piedmont's three-year non-use ofthe Wings mark, which then creates a
presumption of abandonment. This comparison is akin to saying that a birthday is

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contemporaneous to the year in which it occurs. Because, as discussed above, the three-year
period of non-use is not a relatively discrete event, it is difficult to imagine a statement that
would be proportionately contemporaneous with the requisite three years. Indeed, the court
would expect to see either (1) a handful of separate publications citing non-use, including
instances near the beginning and end of the alleged non-use; or (2) a more extensive publication
documenting the three or more years of non-use. The lone Statement hardly approaches this.

d. Independent Corroboration
The factor omitted by L&L, and perhaps the most important factor given the foregoing
discussion, is independent corroboration. In Hicks there were four newspaper articles written by
at least two different authors in two separate newspapers that all identified the manufacturer of
the vaccine in connection with the administration ofthe vaccine at issue.
Here, there is absolutely no independent corroboration. The Article, indeed the
Statement, is the only documentation stating that Piedmont had ceased using the Wings mark,
and the Article does not indicate three years of non-use as asserted by L&L. Indeed, the lack of
corroboration is mirrored in the Article itself, which contains only the solitary Statement of nonuse on which L&L relies.
Given the foregoing discussion, the court finds that the Statement lacks the particularized
guarantees of trustworthiness required for admission under the residual hearsay exception.
Therefore, the Statement is not admissible. The court forgoes discussion of the other residual
exception requirements save to note that the court's trustworthiness concerns also highlight the
diminished probative force of the Article. On these grounds, Beach Mart's Motion to Strike

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Untimely Supplemental Expert Report and to Exclude Belatedly-Produced Hearsay Evidence
[DE-286] is ALLOWED.

IV.

CONCLUSION

For the foregoing reasons, Beach Mart's Motion to Strike Untimely Supplemental Expert
Report and to Exclude Belatedly-Produced Hearsay Evidence [DE-286] is ALLOWED. L&L's
Supplemental Expert Report and its accompanying exhibit [DE-287-1] are struck and are not
admissible.
SO ORDERED.

,

This, the.1~day of January, 2016.

~AMES C. FOX
Senior United States District Judge

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