Yoe v. Crescent Sock Company et al

Filing 465

MEMORANDUM AND ORDER RECONSIDERATION AND SCHEDULING ORDER.For the foregoing reasons, and as set forth herein, Plaintiffs motion for revision [Doc. 458] is GRANTED IN PART and DENIED IN PART. The Courts previous order on the summary judgment motions [Doc. 453] is VACATED IN PART to the extent it dismissed Plaintiffs FITS Claims arising prior to April 22, 2015, and to the extent it dismissed Plaintiffs FITS-only trade secret claims and Defendants FITS-only trade secret countercla ims. The Court hereby reinstates Plaintiffs FITS Claims asserted in Counts I, II, V, VIII, X, XI, and XIII of the third amended complaint, to the extent these claims arose after entry of the chancery courts Order Regarding Post Trial Motions on April 22, 2015. All FITS Claims arising prior to April 22, 2015, remain dismissed pursuant to the Courts November 14, 2017, memorandum and order [Doc. 453]. All FITS-only trade secret claims asserted in Counts VI, VII, and XVI are hereby reinstated. Defendants FITS-only trade secret counterclaims are hereby also reinstated. Signed by Magistrate Judge Susan K Lee on 5/11/2018. (BDG, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT CHATTANOOGA

ROBERT H. YOE, III, et al.,
Plaintiffs,
v.
CRESCENT SOCK COMPANY, et al.,
Defendants.

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Case No. 1:15-cv-3-SKL

MEMORANDUM AND ORDER ON RECONSIDERATION
AND SCHEDULING ORDER
Before the Court is a motion for revision with an accompanying memorandum filed by
Plaintiff Yoe Enterprises Incorporated (“YEI”)1 pursuant to Federal Rule of Civil Procedure 54(b)
[Docs. 458 & 459]. In the motion, YEI seeks a revision of the Court’s November 14, 2017,
memorandum and order granting in part Defendants’ motion for summary judgment and denying
Plaintiffs’ motion for summary judgment [Doc. 453]. Crescent filed a response in opposition to
the motion for revision [Doc. 463], and YEI filed a reply [Doc. 464]. This matter is now ripe.
For the reasons stated below, YEI’s motion will be GRANTED IN PART and DENIED
IN PART. The Court’s previous summary judgment order will be VACATED IN PART to the
extent it dismissed Plaintiffs’ claims arising after April 22, 2015, and to the extent it dismissed
Plaintiffs’ trade secret claims and Defendants’ trade secret counterclaims. The post-April 22, 2015

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Plaintiff Robert H. Yoe, III (“Yoe”) and YEI are collectively referred to as “Plaintiffs.”
Defendants Crescent Sock Company (“Crescent”), Omni Wool, LLC (“Omni Wool”), Catherine
Burn Allen (“Allen”), and Sandra Burn Boyd (“Boyd”) are collectively referred to as
“Defendants.”

claims and the trade secret claims will be REINSTATED. Further, the Court will set a new
schedule, including a status conference.
I.

BACKGROUND
As detailed in many prior filings, this case arises out of a soured business relationship

between Defendants and Plaintiffs. Crescent is a sock manufacturing company. Plaintiff Yoe was
hired in 2000 to serve as Chief Executive Officer and Chief Financial Officer of Crescent.
Defendants Allen and Boyd are part owners of Crescent, and have worked there throughout their
adult lives.2 They are members of the Burn family, which has owned and controlled Crescent
since it began operations in the early 1900s. Yoe owns YEI, which holds intellectual property
rights to sock brands developed by Yoe and manufactured by Crescent during Yoe’s employment
at Crescent, including the FITS and Game Knits brands at issue in this case.
In September 2012, Crescent and YEI entered into an agreement (the “Business
Agreement”) which memorialized prior agreements and the parties’ business relationship in
relevant part as follows:
1. Ownership of Intellectual Property. Any and all new brands, and other
intellectual property relating to such new brands, that are developed, registered,
trademarked, invented, started, conceived or designed by Crescent, Yoe and/or
YEI from January 1, 2009 through the termination of Yoe’s employment with
Crescent (‘the Intellectual Property’) shall be 100% owned by YEI. . . .
2. Royalties as to “Fits” and “Jack’s” Brands. Crescent shall pay royalty payments
to YEI relative to the “Fits” brand . . . [at a rate of $1.00 in 2013 and 2014, and
beginning in 2015 and each year thereafter at a rate of] “5% of Net Sales”; and

2

Defendant Omni Wool is a company that appears to be owned by or affiliated with Defendants.
Plaintiffs allege in this case that Omni Wool and/or Crescent have wrongfully used YEI’s
intellectual property (specifically related to FITS socks) to create and sell socks under the brand
names “Omni Wool Tactical” and “Hiwassee Trading Company.” [Doc. 201 at Page ID # 289497].
2

3. Licensing. On or before 1 year after the execution of [the Business Agreement],
YEI
and
Crescent
will
enter
into
an
agreement
for
licensing/manufacturing/sourcing relative to the Intellectual Property which
includes terms and conditions similar to the LIG contract [and which
incorporates the royalty payment schedule].
[Business Agreement, Doc. 24-3, at Page ID # 110-11]. The Business Agreement is also at least
part of the parties’ licensing agreement, although the parties dispute whether there are additional
terms to the licensing agreement not expressly written in the Business Agreement.
Yoe and five other Crescent employees who worked with the FITS brand were fired by
Crescent on September 4, 2013. The day before, Crescent had filed a lawsuit in the McMinn
County, Tennessee, Chancery Court (the “Chancery Court Case”), seeking a declaration that
certain employment contracts between Yoe and Crescent (which provided for, among other things,
a $2 million severance payment to Yoe upon termination without cause) and the Business
Agreement were void and unenforceable.

Yoe and YEI filed counterclaims and amended

counterclaims in the Chancery Court Case, alleging, inter alia, that Crescent breached the Business
Agreement with YEI, and that:
22.
Upon information and belief, since terminating Mr. Yoe,
Crescent has eliminated certain SKUs of FITS® product[s],
changed the names of certain FITS® products, changed the
packaging of products, ceased research and development of the
FITS® products, is failing to use pre-existing marketing practices
including but not limited to preseason terms and conditions, sales
collateral, and other sales support, is failing to maintain the proper
levels of FITS® product[s] in the retail stores and proper inventory
levels at Crescent, and is representing that Crescent is the owner of
the FITS® brand. Each of these actions is causing irreparable
damages to the FITS® bran[d] to Yoe Enterprises as owner of the
FITS® brand and to Mr. Yoe as the CEO of Yoe Enterprises.
[See Doc. 453 at Page ID # 15551-52; Doc. 24-4 at Page ID # 221]. Plaintiffs also obtained an
injunction that provided, in relevant part:

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It appearing to the Court that the parties to this cause have agreed
on the terms of the Temporary Injunction, that because of the
uniqueness of the brand of sock known as FITS®, and because the
value of this brand of sock may be compromised and/or lost if this
injunction is not granted, it is hereby:
ORDERED, ADJUDGED AND DECREED that:
1.
Crescent Sock Company, its agents, employees,
successors, officers and directors, and all other persons in concert or
participation with such entities, are enjoined from marketing the
FITS® brand products . . . unless each and every product has been
manufactured using the proper materials, proper packaging, proper
technology for manufacturing FITS®, proper manufacturing
processes, and using all of the same specifications required to
manufacture FITS® that were in place as of August 15, 2013 and
using all of the same specifications as required by the patents held
by Yoe Enterprises.
2.
Crescent Sock Company, its agents, employees,
successors, attorneys, officers and directors and all other entities in
active concert or participation with such entities, are hereby
enjoined and required to fulfill any and all orders for FITS® and
Jacks® products in a timely and appropriate manner, all as required
by orders for such products, to the extent that said orders do not
exceed the operating capacity of the Company as it existed on
September 4, 2013, using the correct and proper materials,
packaging, technology, manufacturing specifications and
specifications as set forth above. Further, the Company shall use its
best faith efforts to maintain adequate levels of inventory and yarn
on order and on hand to fulfill such orders. . . .
[Doc. 24-7 at Page ID # 272-73].
The Court detailed the history of the Chancery Court Case in its summary judgment order
[Doc. 453 at Page ID 15547-56] and will not repeat it herein. In that summary judgment order,
the Court denied Defendants’ motion for summary judgment on a number of issues, but granted
summary judgment to Defendants on all Plaintiffs’ claims that related specifically and exclusively

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to Defendants’ production of the FITS brand socks (the “FITS Claims”3) [Doc. 453 at Page ID #
15571]. The Court concluded that in light of the nature of the amended counterclaims and the
injunction in the Chancery Court Case, the FITS Claims were barred in this case by application of
res judicata. As Plaintiffs’ motion for partial summary judgment related only to their FITS
trademark claims, the Court also denied Plaintiffs’ motion on the grounds that such claims were
barred by res judicata. The Court additionally granted summary judgment to Defendants Boyd
and Allen on Plaintiffs’ Count XIII (Boyd and Allen’s inducement of breach of the Business
Agreement) on res judicata grounds. This Count is also part of the FITS Claims, but the Court
addressed it separately in the summary judgment order. The Court will refer to it as being part of
the FITS Claims in this Order, except where necessary to address it separately.
Finally, there are FITS-only trade secret claims. The Court held that Count VII (injunctive
relief – trade secrets), which concerned only FITS, was barred by res judicata. The Court found
that the declaratory relief Plaintiffs seek in Counts VI (declaratory judgment – trade secrets) and
XVI (trade secret misappropriation and unfair competition – Omni Wool Tactical and Hiwassee
Trading Company Socks), was moot to the extent it concerned trade secrets that relate only to FITS
socks [Doc. 453 at Page ID # 15571]. To the extent Plaintiffs seek monetary damages, costs or
fees concerning Defendants’ alleged use or misuse of the FITS-only trade secrets in Counts VI and
XVI, the Court found that res judicata applied. The Court will address the FITS-only trade secret
claims separately in this order.

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“FITS Claims” include Counts I (trademark infringement against Crescent), Count II (trademark
infringement against Boyd and Allen), Count V (violation of the Lanham Act), Count VIII (unfair
or deceptive trade practices under Tennessee Code Annotated § 47-18-101 et seq.), Count X (unfair
competition), and Count XI (breach of the license agreement) to the extent these claims relate to
FITS socks only but not to the extent these claims relate to Game Knits or the Omni Wool Tactical
and Hiwassee Trading Company claims.
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II.

STANDARDS
A.

Federal Rule of Civil Procedure 54(b)

In the instant motion, Plaintiffs ask the Court to reconsider and revise its decision regarding
res judicata pursuant to Federal Rule of Civil Procedure 54(b), which provides:
[A]ny order or other decision, however designated, that adjudicates
fewer than all the claims or the rights and liabilities of fewer than all
the parties does not end the action as to any of the claims or parties
and may be revised at any time before the entry of a judgment
adjudicating all the claims and all the parties’ rights and liabilities.
“District courts have authority under both common law and Rule 54(b) to reconsider interlocutory
orders and to reopen any part of a case before entry of final judgment.” Rodriguez v. Tenn.
Laborers Health & Welfare Fund, 89 Fed. App’x 949, 959 (6th Cir. 2004) (citation omitted).
“Traditionally, courts will find justification for reconsidering interlocutory orders when there is
(1) an intervening change of controlling law; (2) new evidence available; or (3) a need to correct
a clear error or prevent manifest injustice.” Id. (citation omitted). The standard “obviously vests
significant discretion in district courts,” id. at 959 n.7, and “allows district courts to afford such
relief from interlocutory orders as justice requires.” Id. (internal brackets, quotation marks and
citations omitted). Nevertheless, motions to reconsider should be “used sparingly and in rare
circumstances.” Grogg v. Clark, No. 2:15-CV-298-JRG-MCLC, 2016 WL 1394534, at *1 (E.D.
Tenn. Apr. 7, 2016).
B.

Summary Judgment

Summary judgment is mandatory where “there is no genuine dispute as to any material
fact” and the moving party “is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A
“material” fact is one that matters—i.e., a fact that, if found to be true, might “affect the outcome”
of the litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The applicable
6

substantive law provides the frame of reference to determine which facts are material. Id. A
“genuine” dispute exists with respect to a material fact when the evidence would enable a
reasonable jury to find for the non-moving party. Id.; Jones v. Sandusky Cnty., Ohio, 541 F. App’x
653, 659 (6th Cir. 2013); Nat’l Satellite Sports, Inc. v. Eliadis Inc., 253 F.3d 900, 907 (6th Cir.
2001). In determining whether a dispute is “genuine,” the court cannot weigh the evidence or
determine the truth of any matter in dispute. Anderson, 477 U.S. at 249. Instead, the court must
view the facts and all inferences that can be drawn from those facts in the light most favorable to
the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986); Nat’l Satellite Sports, 253 F.3d at 907.
The moving party bears the initial burden of demonstrating no genuine issue of material
fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Jones, 541 F. App’x at 659. To
refute such a showing, the non-moving party must present some significant, probative evidence
indicating the necessity of a trial for resolving a material, factual dispute. Celotex, 477 U.S. at
323. A mere scintilla of evidence is not enough. Anderson, 477 U.S. at 252; McLean v. 988011
Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000). The court’s role is limited to determining whether
the case contains sufficient evidence from which a jury could reasonably find for the non-moving
party. Anderson, 477 U.S. at 248, 249; Nat’l Satellite Sports, 253 F.3d at 907.
To defeat a plaintiff’s claim using an affirmative defense such as res judicata on summary
judgment, a defendant must meet a “substantially higher hurdle” than both the preponderance-ofthe-evidence standard a defendant would have to meet at trial and the typical summary-judgment
standard. Cockrel v. Shelby Ct. School Dist., 270 F.3d 1036, 1056 (6th Cir. 2001). Only after a
moving defendant has discharged the initial burden of proof “does the burden shift to the plaintiff
to show that summary judgment on an affirmative defense should be denied.” Byrne v. CSX
7

Transp., Inc., 541 F. App’x 672, 675 (6th Cir. 2013). A moving defendant “must show that the
record contains evidence satisfying the burden of persuasion and that the evidence is so powerful
that no reasonable jury would be free to disbelieve it.” Id. (quoting 11 James William Moore et
al., Moore’s Federal Practice § 56.13[1], at 56–138 (3d ed. 2000)). The court “must view the
evidence and draw all inferences in the light most favorable to the nonmoving party, and
‘[s]ummary judgment in favor of the party with the burden of persuasion . . . is inappropriate when
the evidence is susceptible of different interpretations or inferences by the trier of fact.’” Arnett v.
Myers, 281 F.3d 552, 561 (6th Cir. 2002) (quoting Hunt v. Cromartie, 526 U.S. 541, 553 (1999))
(alterations in original).
III.

ANALYSIS
YEI contends that the Court erred in finding the FITS Claims were part of the same series

of transactions, in terms of their subject matter, that were adjudicated in the Chancery Court Case
[Doc. 459 at Page ID # 15617-19; Doc. 464 at Page ID # 15720-21]. YEI also contends that the
Court erred in dismissing on res judicata grounds any claims that arose after entry of judgment in
the Chancery Court Case in December 20144 [Doc. 459 at Page ID # 15606-17; Doc. 464 at Page
ID # 15713-29].

4

YEI argued in its opening brief that a bright-line rule applied to bar any claims arising after
commencement of the Chancery Court Case on September 3, 2013 [Doc. 459 at Page ID # 1560304, 15614]. On this issue in the reply brief, YEI mainly argues that its claims arising “after the
state court rendered its judgment on December 23, 2014, or after its entry on December 29, 2014,
are not subject to res judicata.” [Doc. 464 at Page ID # 15713; see also id. at Page ID # 15722
(“[A]ny claims accruing after the trial court’s rendered judgment could not be barred . . . .”); id. at
Page ID # 15724 (“The language adopted by Creech—that claim preclusion can extend only to the
facts in issue as they existed at the time the judgment was rendered—and its application, leads to
the most practical result.”)].
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After careful consideration, the Court finds it necessary to revise the summary judgment
order. Plaintiffs’ FITS Claims, including any inducement of breach of contract claims against
Boyd and Allen, arising after entry of the “Order Regarding Post Trial Motions” in the Chancery
Court Case on April 22, 2015, are not barred by application of the doctrine of res judicata. Based
on YEI’s representations concerning the FITS-only trade secret claims (addressed below), the
Court finds that the FITS-only trade secret claims should be reinstated in their entirety. The Court
further finds, however, that YEI has failed to show clear error in the Court’s conclusion that any
FITS Claim, including inducement of breach of contract claims against Boyd and Allen, arising
on or before April 22, 2015, are barred. It is undisputed that Crescent stopped manufacturing FITS
socks on February 28, 2016 [Doc. 377-6 at Page ID # 10872]. As a result, the Court’s holding
reinstates Plaintiffs’ FITS Claims, including the inducement of breach of contract claims, arising
between April 22, 2015, and February 28, 2016. In correcting this error, the Court notes that the
issue of when the continuing claims arose vis-à-vis entry of the Chancery Court Case “final
judgment” was only raised in passing, at best, in the Plaintiffs’ response to Defendants’ motion for
summary judgment [Doc. 382 at Page ID # 10991-92]. Regardless, Rule 54 provides a vehicle for
correction.
A.

Res Judicata

As the Court explained in the summary judgment order, “[s]tate-court judgments are given
the same preclusive effect under the doctrine of res judicata . . . as they would receive in courts of
the rendering state.” Ohio ex rel. Boggs v. City of Cleveland, 655 F.3d 516, 519 (6th Cir. 2011).
“If an individual is precluded from litigating the suit in state court by the traditional principles of
res judicata, he is similarly precluded from litigating the suit in federal court.” Id. (internal
quotation marks and citations omitted). The Court must “look to the state’s law to assess the
9

preclusive effect it would attach to that judgment.” Id. (internal quotation marks and citations
omitted). While YEI suggests that federal law on res judicata should apply in this case [Doc. 464
at Page ID # 15715-17], the Court is required to apply Tennessee’s law on res judicata. Id. There
is some overlap, but also some significant distinctions, between the two.
In Tennessee, “[t]he doctrine of res judicata or claim preclusion bars a second suit between
the same parties or their privies on the same claim with respect to all issues which were, or could
have been, litigated in the former suit.” Jackson v. Smith, 387 S.W.3d 486, 491 (Tenn. 2012)
(citations omitted). “Res judicata acts as a ‘rule of rest’ meant to promote finality, prevent
inconsistent or contradictory judgments, conserve resources, and prevent vexatious lawsuits.”
Rainbow Ridge Resort, LLC v. BB&T Co., 525 S.W.3d 252, 259 (Tenn. Ct. App. 2016) (internal
quotation marks and citations omitted). There are four elements to res judicata: (1) a previous
action before a court of competent jurisdiction, (2) involving the same parties or their privies, (3)
involving the same cause of action, and (4) resulting in a final judgment on the merits. Id. (internal
quotation marks and citations omitted). “The doctrine of res judicata only requires that there be a
full and fair opportunity to litigate all issues arising out of the claim, however, every applicable
issue need not be actually litigated in order for res judicata to apply.” Gerber v. Holcomb, 219
S.W.3d 914, 918 (Tenn. Ct. App. 2006) (internal quotation marks, citations, and italics omitted).
Two suits are deemed the “same ‘cause of action’ for purposes of res judicata where they
arise out of the same transaction or a series of connected transactions.” Creech v. Addington, 281
S.W.3d 363, 381 (Tenn. 2009) (citations omitted). “The doctrine of res judicata ‘extends only to
the facts in issue as they existed at the time the judgment was rendered, and does not prevent a reexamination of the same question between the same parties where in the interval the facts have

10

changed or new facts have occurred which may alter the legal rights or relations of the litigants.’”
Id. (quoting Banks v. Banks, 77 S.W.2d 74, 76 (Tenn. Ct. App. 1934)).
Plaintiffs argue that none of the FITS Claims are barred because the FITS Claims arose out
of a different series of transactions than the claims at issue in the Chancery Court Case, in the
sense that the subject matter of the claims is different. They also argue that, even if earlier FITS
Claims and inducement of breach of contract claims are part of the same series of transactions, no
claims based on Defendants’ alleged continuing infringement and other wrongful actions after the
chancery court “rendered” judgment on December 23, 2014, can be barred. The Court will deal
with the subject matter arguments first, and then address the point at which the chancery court’s
judgment became “final,” therefore creating a preclusive effect.
B.

Same Transaction or Occurrence – Subject Matter of Chancery Court Case

“‘[T]ransaction’ for res judicata purposes is intended to be analogous to the phrase
‘transaction or occurrence’ as used in the Federal Rules of Civil Procedure.” Creech, 281 S.W.3d
at 380 (citing, inter alia, Fed. R. Civ. P. 13(a)(1) (determining whether counterclaims are
compulsory)). Courts use a “logical relationship test to determine whether claims arise out of the
same transaction or series of transactions. Roberts v. Vaughn, No. W2008-01126-COA-R3-CV,
2009 WL 1608981, at *7 (Tenn. Ct. App. June 10, 2009) (quoting Sanders v. First Nat’l Bank &
Trust Co. in Great Bend, 936 F.2d 273, 277 (6th Cir. 1991)). Under this approach, courts are to
“look to the issues of law and facts raised by the claims to see if they are largely the same.”
Suddarth v. Household Comm. Fin. Servs., Inc., No. M2004-01664-COA-R3-CV, 2006 WL
334031, at *3-4 (Tenn. Ct. App. Feb. 13, 2006) (holding that claims are barred where “the former
action arose out of the same business relationship between the [parties] at issue in the present

11

action, and specifically out of the guaranty agreement sued on in the former action”) (citing
Sanders, 936 F.2d at 277).
The Court found that Plaintiffs’ FITS Claims were part of the same series of transactions
that were the subject of Plaintiffs’ Chancery Court Case counterclaims and the injunction, that is,
claims arising from the disintegration of the parties’ business relationship, and the division and
protection of the FITS brand in the wake of Yoe’s termination from Crescent. The FITS Claims
in the third amended complaint in this case are largely if not entirely predicated on the idea that
after Yoe was fired, Crescent exercised control over the FITS brand. This included making
changes to the design of FITS socks and their branding or marketing, and representing that
Crescent was the owner of FITS, when the true owner of the brand was actually YEI. Plaintiffs
claim this caused damage to Plaintiffs and to the brand more generally. In previously dismissing
the FITS Claims on Defendants’ motion for summary judgment, the Court reasoned:
It is clear from Yoe and YEI’s pleadings in the Chancery
Court Case, in particular the January 2014 amended counterclaim
and third-party complaint detailed above, that the allegedly
infringing/unfair conduct with respect to FITS was occurring or had
already occurred prior to the expiration of the injunction. The Court
therefore rejects Yoe and YEI’s characterization of the Chancery
Court Case as having a “singular” purpose of “invalidat[ing] the
contracts that gave YEI ownership of FITS and Bob Yoe a severance
package,” and as “deal[ing] with matters that existed before
September 3, 2013, when Crescent sued Yoe.” [Doc. 382 at Page ID
# 10990-91]. The existence of the injunction, which is by nature
forward looking, belies Yoe and YEI’s characterization, as do the
allegations in Yoe and YEI’s January 2014 amended
countercomplaint and third-party complaint in the Chancery Court
Case:
22.
Upon information and belief, since
terminating Mr. Yoe, Crescent has eliminated certain
SKUs of FITS® product[s], changed the names of
certain FITS® products, changed the packaging of
products, ceased research and development of the
FITS® products, is failing to use pre-existing
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marketing practices including but not limited to
preseason terms and conditions, sales collateral, and
other sales support, is failing to maintain the proper
levels of FITS® product[s] in the retail stores and
proper inventory levels at Crescent, and is
representing that Crescent is the owner of the FITS®
brand. Each of these actions is causing irreparable
damages to the FITS® bran[d] to Yoe Enterprises as
owner of the FITS® brand and to Mr. Yoe as the
CEO of Yoe Enterprises.
[Doc. 24-4 at Page ID # 221]. These assertions, along with the
injunction, effectively expanded the scope of the lawsuit to include
events and interactions between the parties that occurred after the
filing of the initial chancery court complaint. The alleged acts of
infringement, unfair competition, etc. [asserted in the federal court
case], arise out of the same series of transactions that necessitated
the injunction in the first place—once again, the disintegration of
the parties’ business relationship, and the division and protection of
the FITS brand in the wake of Yoe’s termination from Crescent.
[Doc. 453 at Page ID # 15567-68]. These same allegations form the basis for Plaintiffs’ FITS
Claims in the third amended complaint [Doc. 201]. The following are relevant excerpts from the
third amended complaint:


Count I – Federal Trademark Infringement – Crescent: “Without authorization or
approval by YEI, [Crescent] has utilized the marks in connection with goods and
products which have not been approved by YEI. Such unauthorized conduct
includes, among other things, advertising, selling and marketing socks not
manufactured pursuant to YEI’s specifications or quality standards with the YEI
Trademarks. In addition, Crescent has used advertising and other materials which
display the YEI Trademarks which have not been approved or authorized by YEI.”
[Doc. 201 at Page ID # 2881].



Count II – Federal Trademark Infringement – Individual Defendants: “The
individual Defendants have personally authorized and/or taken part in the
infringing activities of Crescent and/or have specifically directed its employees to
do so. The individual Defendants are central figures in the infringements who have
authorized and approved the activities of Crescent described herein for their
personal gain.” [id. at Page ID # 2882].



Count V – Violation of the Lanham Act, 15 U.S.C. § 1125(a): Crescent’s “actions
are designed to and are likely to confuse buyers and others in the chain of marketing
and distribution into believing that those goods are authorized by YEI, are of the
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quality with which socks manufactured according to YEI’s specifications are
associated, and to confuse potential buyers and others as to the sources and quality
of the goods.” [id. at Page ID # 2884].




Count VII – Injunctive Relief – Trade Secrets: “Crescent has misused YEI’s trade
secrets, has used them without authorization from YEI, and has impermissibly used
them to manufacture socks not approved by YEI. The products Crescent has
impermissibly manufactured with the Trade Secrets are inferior to authorized YEI
products and cause damage to YEI’s brands. Crescent will continue to
impermissibly use the Trade Secrets unless enjoined by the Court.” [id. at Page ID
# 2886-87].



Count VIII – Unfair or Deceptive Trade Practices Under Tennessee Code
Annotated § 47-18-101 et seq.: “Defendants have . . . engaged in unfair and
deceptive acts and practices, including . . . falsely passing off their goods as those
of YEI . . . .” [id. at Page ID # 2888].



Count X – Unfair Competition: “Because Crescent has used, without YEI’s
authorization, its marks and represented to the public that FITS® . . . brand socks
are products consistent with the reputation which the public associates with YEI’s
marks; and has sold inferior products using, without authorization, YEI’s marks;
and has used the YEI Trademarks without YEI’s authorization, it is competing and
has competed unfairly with YEI in violation of Tennessee law.” [id. at Page ID #
2889].



5

Count VI – Declaratory Judgment – Trade Secrets5: “[T]he proprietary processes,
patterns, methods, and techniques developed by Yoe are trade secrets belonging to
YEI. . . . Crescent has represented that it owns, controls, and has the right to use
without limitation YEI’s trade secrets.” [id. at Page ID # 2884-85].

Count XI – Breach of License Agreement: “Crescent’s actions in terminating Mr.
Yoe, in failing to properly and prudently manufacture, market and promote the
FITS® brand under Mr. Yoe’s direction, in eliminating SKUs, changing the name
and packaging of FITS® products, ceasing R & D of the FITS® products, failing
to use pre-existing marketing practices approved by YEI, and in marketing,
manufacturing and promoting the FITS® products in a manner unacceptable to and
unapproved by YEI, the owner of the FITS® brand, and the conduct listed in

The Court notes that it dismissed Count VI – Declaratory Judgment – Trade Secrets as moot, and
found that any monetary damages Plaintiffs sought under that count were barred by res judicata
[Doc. 453 at Page ID # 15571-72].
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Paragraphs 32 and 356 of this Complaint, constitute a violation and breach of [the
Business Agreement and Yoe’s employment contracts].” [id. at Page ID # 2890].


Count XIII – Defendants Allen and Boyd’s Inducement of Breach of Contract
(YEI): “Defendants directed and caused Crescent to file suit seeking to declare the
Business Agreement void as to Mr. Yoe and YEI and to exercise complete and
deliberate control over the YEI brands and the Intellectual Property. . . . Defendant
Allen and Boyd’s actions . . . constituted an intentional and unjustified inducement
of a breach of the contractual relationship between Crescent and YEI.” [Doc. 201
at Page ID # 2892].
Plaintiffs are alleging legal theories in this case which they did not assert or did not pursue

to final judgment in the Chancery Court Case, but whether Defendants breached the Business
Agreement (which is at least part of the licensing agreement) was clearly at issue in the Chancery
Court Case. Indeed, the chancery court held that “YEI is the owner of the respected brands in
question, and by Crescent now claiming ownership of the brands, Crescent has in fact breached
the [Business Agreement] . . . .” [Doc. 382-3 at Page ID #11115]. The chancery court also held
that the filing of the Chancery Court Case did not, in and of itself, constitute a breach of the
Business Agreement [Doc. 56-1 at Page ID # 617-18]. Moreover, whether Defendants were
properly producing FITS during the time period following Yoe’s termination was clearly at issue
in the Chancery Court Case, as evidenced by Plaintiffs’ allegations concerning Defendants’
changing SKUs, changing marketing practices, etc., and also as evidenced by the chancery court
injunction. Finally, the Business Agreement is an integral component of the parties’ licensing

6

Paragraph 32 of the third amended complaint describes how the individual Defendants owned
warehouses which they leased to Crescent for “substantial lease payments,” and their own personal
gain. It states that “[i]f a plan advocated by Mr. Yoe to build Crescent’s own warehouse and
terminate the leases . . . were implemented, Defendants Allen and Boyd . . . would no longer
receive the lease payments and suffer personally.” [Doc. 201 at Page ID # 2876]. Paragraph 35
simply states that “Crescent has failed and refused to abide by the terms of the Business
Agreement, asserting that its terms are not binding upon [Crescent].” [id. at Page ID # 2877].
15

agreement. Defendants contend the Business Agreement defines the entire scope of the licensing
agreement; Plaintiffs contend there are additional “terms” or rights that YEI held.
What the Court is confronted with in this case, versus the Chancery Court Case, are
essentially claims for different types of breaches of the same contract (the Business Agreement,
an integral component of the parties’ licensing agreement), by the same parties, arising from
conduct that was specifically prohibited by an injunction that was repeatedly affirmed in the
Chancery Court Case. In both cases, Plaintiffs have asserted Defendants breached the Business
Agreement, and therefore the licensing agreement. The specifications of FITS socks were at issue
via the injunction and other allegations made by Plaintiffs in the Chancery Court Case, and they
are at issue in this case through a host of claims as quoted above. In spite of the non-suit of certain
claims, the injunction itself is a form of relief concerning Defendants’ production of FITS in the
wake of Yoe’s termination.
In addition, the Court found that Plaintiffs’ claim in this case for inducement of breach of
contract against Boyd and Allen (Count XIII) was barred because: 1) it is based on Boyd and
Allen’s alleged inducement of Crescent’s breach of the Business Agreement, with the breach being
the filing the Chancery Court Case and the subsequent exercise of control over FITS without Yoe’s
input; 2) Crescent’s breach of the Business Agreement was clearly part of the Chancery Court
Case; 3) the injunction in the Chancery Court Case was directed to Boyd and Allen as employees
and officers of Crescent; 4) Boyd and Allen were parties to the Chancery Court Case; and 5) it is
beyond serious dispute that Boyd and Allen were at least partially, if not mostly, in control of
Crescent at all relevant times [Doc. 453 at Page ID # 15565-66]. Clearly, the parties were litigating
facts in the Chancery Court Case that would have strongly overlapped with any claim that Boyd
and Allen induced Crescent’s breach of the Business Agreement.
16

In support of their position that the Court’s decision that the FITS Claims are not part of
the same transaction or occurrence, Plaintiffs rely most heavily on Acumed, LLC v. Stryker Corp.,
525 F.3d 1319 (Fed. Cir. 2008) [Doc. 459 at Page ID # 156187]. In that case, Acumed first sued
Stryker for patent infringement relating to a type of medical nail used to repair bone fractures.
Stryker called its nail the T2 PHN. During the course of the T2 PHN litigation, Acumed discovered
that Stryker had allegedly used the same patent to make a second, longer type of nail, the T2 Long.
Acumed, 525 F.3d at 1322. The trial court offered to allow Acumed to amend its T2 PHN
complaint to include allegations that the T2 Long infringed on the patent, but warned that the
amendment would delay the trial by up to one year. Acumed opted to proceed to trial on the T2
PHN nail infringement claims, and then later filed a completely separate action on the T2 Long.
The trial court in the second suit dismissed Acumed’s claim on the T2 Long on claim preclusion
(res judicata) grounds. Id. On appeal of the dismissal of the second suit, the only issue was
whether the cases involved “the same claim or cause of action.” Id. at 1323 (internal quotation
marks and citation omitted).
The United States Court of Appeals for the Federal Circuit found that “[w]hether two
claims for patent infringement are identical is a claim preclusion issue that is ‘particular to patent
law,’” and therefore must be analyzed “under Federal Circuit law.” Id. (quoting Hallco Mfg. Co.
v. Foster, 256 F.3d 1290, 1294 (Fed. Cir. 2001)) (other citation omission). The court cited earlier
Federal Circuit precedent which specifically held that “[w]ith respect to patent litigation, we are
unpersuaded that an ‘infringement claim,’ for purposes of claim preclusion, embraces more than

7

Plaintiffs write in their memorandum in support of their motion to revise, “[a] more stark contrast
between what this Court has decided and what other courts have decided can’t be better presented
than in the Acumed case.” [Doc. 459 at Page ID # 15618].
17

the specific devices before the court in the first suit.” Id. at 1324 (quoting Young Eng’rs, Inc. v.
United States Int’l Trade Comm’n, 721 F.2d 1305, 1316 (Fed. Cir. 1984) (other citation omitted).
The court thus found that “claim preclusion does not apply unless the accused device in the action
before the court is ‘essentially the same’ as the accused device in a prior action between the parties
that was resolved on the merits.” Id. (citation omitted). Ultimately, the court concluded that the
structure of the T2 PHN and T2 Long was not “essentially the same,” and therefore res judicata
did not apply.
Here, the issues of claim preclusion, or res judicata, are not so narrow nor are they governed
by federal law. The claims, allegations, and relief Plaintiffs have pursued and continue to pursue
in these two cases are broader than the issues in Acumed, and therefore the application of claim
preclusion (res judicata) is also broader. For example, Plaintiffs’ Count I alleges that Crescent
“has utilized the [trade]marks in connection with goods and products which have not been
approved by YEI.” [Doc. 201 at Page ID # 2881]. Plaintiffs’ theory is that all FITS socks had to
be approved by Yoe before they could be sold, which Defendants dispute. That fundamental issue,
and any claims for relief that flow from its resolution (and which arose prior to April 22, 2015),
could have and should have been raised in the Chancery Court Case. As discussed below,
however, the Court now finds that any unapproved changes that occurred after April 22, 2015,
gave rise to a new cause of action, and therefore a new opportunity for Plaintiffs to make this
argument, and to seek damages for any post-April 22, 2015, conduct.
Finally, the Court was careful to exclude from its res judicata holding any claims involving
allegations that Defendants misappropriated Plaintiffs’ intellectual property in FITS by
incorporating it into the Hiwassee Trade Company or Omni Wool socks. For these reasons,
Acumed is distinguishable.
18

Plaintiffs also rely on Grendene USA, Inc. v. Brady, No. 3:14-cv-2955-GPC-KSC, 2015
WL 1499229 (S.D. Cal. Apr. 1, 2015). In that case, the Bradys had filed a trademark infringement
action against Grendene on March 9, 2012. Grendene then sued the Bradys on December 15,
2014, arguing the filing of the trademark suit constituted a breach of a 1995 settlement agreement
that contained a covenant not to sue. Id. at *1. The Bradys argued in the later suit that Grendene’s
breach of contract claim should be dismissed because it was a compulsory counterclaim in the
earlier trademark infringement case. The court denied the motion to dismiss, finding in relevant
part that:
In determining whether a counterclaim is compulsory, the
Ninth Circuit applies the “logical relationship test” which analyzes
whether the essential facts of the various claims are so logically
connected that considerations of judicial economy and fairness
dictate that all issues be resolved in one lawsuit. Applying the
logical relationship test, the “essential facts” of the Bradys’ causes
of action in the Trademark Action differ from those of Grendene’s
breach of contract cause of action. The Trademark Action involves
facts dealing with alleged infringement. This action involves facts
dealing with the Bradys[’] decision to file a lawsuit based on that
alleged infringement. These are separate facts as the decision to
bring a legal cause of action is separate from the elements of that
cause of action. Accordingly, the Court finds that Grendene’s
breach of contract cause of action was not a compulsory
counterclaim.
2015 WL 1499229, at *3 (internal quotation marks, citations and alterations omitted). As Crescent
points out, however, the court in Grendene offers little analysis and the decision is not binding on
this Court. Moreover, as described above, facts underlying Plaintiffs’ FITS Claims were involved
in the Chancery Court Case. The breaches alleged by Plaintiffs in the Chancery Court Case
involved actions allegedly taken by Defendants regarding FITS after Defendants filed the
Chancery Court Case and terminated Yoe, not just Defendants’ decision to take the action of firing
Yoe.
19

The Court finds Plaintiffs have failed to show any clear error with the Court’s prior decision
that the FITS Claims are part of the same transaction or occurrence (in the subject matter sense)
as the claims involved in the Chancery Court Case.
C.

Final Judgment

YEI also argues that, even if the FITS Claims arose out of the same transaction or
occurrence, any claims which arose after the date the chancery court rendered its judgment on
December 23 (or the date the chancery court clerk entered the judgment on December 29, 2014),
cannot be barred by res judicata. The Court did not discuss this issue as such in its prior summary
judgment order except to note that the various amendments to and allegations in Plaintiffs’
pleadings in the Chancery Court Case and the injunction expanded the scope of the lawsuit to
include claims that arose after the filing of the complaint [Doc. 453 at Page ID # 15567-68].
In the pending motion, YEI originally argued that res judicata does not apply to any events
occurring after the commencement of the Chancery Court Case on September 3, 2013 under a
bright-line rule [Doc. 459 at Page ID # 15614]. In its reply, however, YEI seems to acknowledge
that Tennessee has not adopted the bright-line rule and mainly argues that FITS Claims arising
from actions “occurring after the state court rendered its judgment on December 23, 2014, or after
its entry on December 29, 2014, are not subject to res judicata.” [Doc. 464 at Page ID # 15713;
see also, e.g., id. at Page ID # 15724 (“The language adopted by Creech—that claim preclusion
can extend only to the facts in issue as they existed at the time the judgment was rendered—and
its application, leads to the most practical result.”)]. As pertinent here, the issue is when the
judgment became “final” such that it began to have preclusive effect.
In Tennessee, a judgment is final “when it decides and disposes of the whole merits of the
case leaving nothing for the further judgment of the court.” Creech, 281 S.W.3d at 377 (quoting
20

Richardson v. Tenn. Bd. of Dentistry, 913 S.W.2d 446, 460 (Tenn. 1995)). “In the absence of an
express direction of the court to the contrary, a judgment that disposes of only some of the claims,
issues, or parties is not a final judgment adjudicating all claims and the rights and liabilities of all
parties.” Id. (citations omitted).8 In Creech, the Tennessee Supreme Court explained that “a
judgment is not final and res judicata where an appeal is pending.” Creech, 281 S.W.3d at 37778 (quoting McBurney v. Aldrich, 816 S.W.2d 30, 34 (Tenn. Ct. App. 1991)) (citing Freeman v.
Marco Transp. Co., 27 S.W.3d 909, 913 (Tenn. 2000)); see also Brown v. Burch, Porter, &
Johnson PLLC Law Firm, No. 15-2167, 2015 WL 5737802, at *5 (W.D. Tenn. Sept. 30, 2015)
(“Unlike federal law, under Tennessee law a judgment is not final for purposes of res judicata
where an appeal is pending.” (internal quotation marks, alteration, and citations omitted)). “[T]his
general rule places Tennessee in the minority of jurisdictions. The federal courts and the majority
of states have found ‘[t]he better view,’ to be that taking of an appeal does not affect the finality
of a judgment for res judicata purposes.” Creech, 281 S.W.3d at 377 n.17 (quoting Restatement
(Second) of Judgments § 13 cmt. f) (other citations omitted).
Creech is a procedurally and factually complicated case involving a failed casino/real
estate development project. The trial court in Creech entered a judgment as to some of the
8

On October 31, 2017, the Court granted Crescent leave to file an amended answer to assert the
affirmative defense of res judicata over Plaintiffs’ objections [Doc. 406]. Crescent claims it waited
to assert the res judicata defense until after the Chancery Court Case appeal had been resolved and
the case remanded to the chancery court to correct an issue concerning attorney’s fees, which the
parties eventually resolved by agreement, with the “final order” entered by the chancery court on
August 23, 2017 [Doc. 300-4]. The Court found that because the “final order” was not entered
until August 2017, Crescent acted diligently enough and satisfied the applicable requirements of
Federal Rules of Civil Procedure 15 and 16, even though Crescent sought leave to amend until
almost a year after the deadline for amendments, and over a year after the Tennessee Court of
Appeals entered its order largely affirming the chancery court’s findings [Doc. 406 at Page ID #
11459-61]. It suffices to note here that the question of whether the Court should allow a party to
amend its pleadings to assert a defense of res judicata is different from the question of whether
claims are barred by res judicata.
21

defendants, including real estate agents Betty and Lloyd Link (the “Links”), in 1998. The
judgment as to the last defendant was not entered until January 2, 2003. Id. at 370. The plaintiffs
appealed the dismissal of certain defendants (landowners Parker and Flowers), and the Tennessee
Court of Appeals remanded for further proceedings. Id. at 370-71. As it turned out, the liability
of Parker and Flowers depended on whether the Links could be held liable as the agents of Parker
and Flowers. Id. Because the plaintiffs had not appealed the original dismissal of the Links, the
judgment against the Links became final on February 1, 2003 (thirty days after the order resolving
the claims as to the last defendant). Id. at 377. The plaintiffs discovered additional allegations
involving the Links, which arose from the same failed development project, in September 2000,
but did not assert any claims against Parker and Flowers related to these allegations until 2005,
after the court of appeals remanded the case against Parker and Flowers. Id. at 375. On remand,
Parker and Flowers argued that the plaintiffs’ new claims involving the allegations against the
Links were barred, but the trial court disagreed and conducted a trial against Parker and Flowers.
Ultimately, the Tennessee Supreme Court found the trial court decided the res judicata issue
wrongly. Even though the plaintiffs did not discover the additional claims against the Links until
after the Links had been dismissed from the case (in 1998), the supreme court held that the
plaintiffs “had the opportunity to fully and fairly litigate the fraudulent misrepresentation claims
against the Links before the finality of the judgment” on February 1, 2003. Id. at 382. The court
reasoned that the plaintiffs could have amended their complaint to allege the fraudulent
misrepresentation claims against the Links (even after the Links had been dismissed from the case),
or appealed the original dismissal of the Links. Id. at 382-83.
Creech clearly states that a judgment pending on appeal is not final and does not have
preclusive effect; however, the claims that were barred in that case unquestionably arose prior to
22

the commencement of the case, although the plaintiffs did not discover them until much later. Id.
at 382-83. Moreover, the plaintiffs in that case discovered the relevant claims against the Links
before the actual judgment against the Links became final, even though the Links had been
dismissed years prior. The Creech court also noted that “[t]here are a number of circumstances in
which a second action by a plaintiff against the same defendant might be necessary and appropriate
even though the second suit arises out of the same transaction or series of connected transactions
as the first suit,” for example “when a plaintiff is initially unaware of the existence of a cause of
action due to the defendants’ own concealment or misrepresentation.” Id. at 381-82 (citing
Restatement (Second) of Judgments § 26(1)9).
Regions Financial Corp. v. Marsh USA, Inc., 310 S.W.3d 382 (Tenn. Ct. App. 2009), was
decided shortly before Creech. In that case, Regions argued that its claims were not barred by res
judicata where they were based upon facts that allegedly had been concealed by a group of
defendants referred to as the “Excess Insurers.” Id. at 386. Regions had filed a federal court case
against the Excess Insurers for breach of contract, and appealed that case to the Sixth Circuit.
While that case was on appeal, Regions discovered facts that “occurred before it filed suit in
District Court but which [Regions] claims it had not discovered until it appealed to the Sixth
Circuit.” Id. at 394. Regions then filed the state court case asserting similar claims as in the federal
court case, but which were based on the new facts. Id. at 389-90. The state trial court dismissed
Regions’s claims on res judicata grounds. Id. at 389. The trial court rejected Regions’s argument

9

Another circumstance listed in the Restatement, although not discussed in Creech, is “[f]or
reasons of substantive policy in a case involving a continuing or recurrent wrong, the plaintiff is
given an option to sue once for the total harm, both past and prospective, or to sue from time to
time for the damages incurred to the date of suit, and chooses the latter course.” Restatement
(Second) of Judgments § 26(1)(e).
23

that Regions could not have relied on these facts in the earlier federal court case because the facts
had allegedly been concealed until “several months after the District Court disposed of the parties’
post-trial motions and after Regions had filed its appeal to the Sixth Circuit.” Id. at 394. The trial
court held that the relevant facts were “known before the [Sixth Circuit] ruled and there was plenty
of time to raise or present those facts to either the District Court or the [Sixth Circuit].” Id. (quoting
trial court’s holding). The trial court found that Regions could have raised the new claims in the
federal court through a Federal Rule of Civil Procedure 60(b) motion, and the Tennessee Court of
Appeals affirmed. Id. at 394-95.
Like Creech, the difference between Regions and this case is that Plaintiffs allege a number
of claims which are based on actions that allegedly occurred not only after the filing of the
chancery court complaint, but also after the amended counterclaims, the chancery court trial, and
even after the chancery court ruled on the post-trial motions in April 2015. The court in Regions
emphasized that:
[w]e must be careful to distinguish between a “change in facts” or
“new facts [which] have occurred after the original judgment” and
“newly discovered evidence.” Newly discovered evidence is simply
evidence of facts as they existed at the time of the original trial and
cannot be said to be a “change in facts” or “new facts.”
Regions, 310 S.W.3d at 394 (quoting Short v. Short, No. 03A01-9402-CH-00065, 1994 WL
315902, at *4 (Tenn. Ct. App. 1994)). The Regions court found it was important to maintain this
distinction because:
[a] prior judgment or decree does not prohibit the later consideration
of rights that had not accrued at the time of the earlier proceeding or
the reexamination of the same question between the same parties
when the facts have changed or new facts have occurred that have
altered the parties’ legal rights and relations.

24

Id. at 393 (quoting Lien v. Couch, 993 S.W.2d 53, 56 (Tenn. Ct. App. 1998)) (other citations
omitted).

In Segroves v. Union Carbide, the Tennessee Supreme Court Special Workers

Compensation Appeals Panel put it this way: “any ‘new facts’ asserted in a second action must
have occurred after the first adjudication; they do not include newly discovered evidence of facts
that existed prior to the adjudication.” No. E2015-00572-SC-R3-WC, 2015 WL 8483629, at *3
(Tenn. Dec. 10, 2015). In Merwin v. Davis, the Tennessee Court of Appeals affirmed a trial court’s
dismissal of claims arising prior to entry of a settlement agreement of a prior civil action; however,
the court allowed claims for malicious prosecution, civil conspiracy, and breach of contract which
arose after entry of the settlement, but out of the same neighbor dispute, to proceed. No. E201600508-COA-R3-CV, 2017 WL 935107 (Tenn. Ct. App. Mar. 9, 2017); see also Parvin v. Newman,
518 S.W.3d 298, 306, 311 (Tenn. Ct. App. 2016) (husband’s abuse of process claim arising from
wife’s filing of allegedly harassing motion during divorce proceedings barred from later
prosecution by entry of final divorce decree which stated that parties “had reached an agreement
to settle and compromise all of the matters in dispute”).
Of course, the language in Regions and Segroves discussing how claims are not barred
when they are based on “new facts” which arise “after the original judgment,” or when they “had
not accrued at the time of the earlier proceeding,” or which “have occurred after the first
adjudication,” begs a question mentioned earlier in this memorandum—at what point did the
judgment/adjudication/decision in the Chancery Court Case become final such that it took on
preclusive effect? Creech explicitly says a judgment on appeal is not final for res judicata
purposes. Regions says that a party can file a post-trial Rule 60 motion to request relief on
previously unasserted claims. But again, both of those cases involved claims that arose prior to
commencement of the second suit (even if the claims were not discovered until later). Plaintiffs
25

argue that to deny them relief on their claims arising after the trial court rendered its December 23,
2014, judgment in the Chancery Court Case would “reward Crescent for its continued, unabated,
wrongful conduct.” [Doc. 464 at Page ID # 15729].
YEI cites federal court cases in its opening brief which hold that claims for continuing
wrongs (like an ongoing trademark infringement), are not barred in a subsequent case if the claims
arise after the filing of a complaint in a prior case.10 These cases do not appear to align with the
broader application of res judicata under Tennessee law, which as even YEI appears to recognize
in reply, bars claims arising prior to judgment, not the filing of the complaint.
Keeping these principles in mind, the Court concludes that any FITS Claims, including any
inducement of breach of contract claims arising after the chancery court entered (signed) the Order
Regarding Post Trial Motions on April 22, 2015, are barred. Although neither party addressed the
Order Regarding Post Trial Motions order in its briefing as being the relevant order, the chancery
court specifically identified it as the “final order” [Doc. 56-1 at Page ID # 631]. The chancery
court also found that the December 29, 2014, order “should not have been entitled Final Order
because that order did in fact resolve less than all of the claims before the court, as specifically
stated by the court . . . .” [id. at Page ID # 629].

10

Plaintiffs cite Rawe v. Liberty Mutual Fire Insurance Company, in which the Sixth Circuit held
that under federal law, claims which were not ripe until after the plaintiff filed her first lawsuit
could not be barred in a subsequent lawsuit. 462 F.3d 521, 529 (6th Cir. 2006). Smith v. Potter,
513 F.3d 781 (7th Cir. 2008), also involved federal law on res judicata.
Plaintiffs also cite Marcel Fashions Group v. Lucky Brand Dungarees, Inc., 779 F.3d 102,
106, 108-10 (2d Cir. 2015), in which the Second Circuit held that claims arising after entry of a
prior, unappealed judgment were not barred in a subsequent suit. The Second Circuit also held in
TechnoMarine SA v. Giftports, Inc., 758 F.3d 493, 502-03 (2d. Cir. 2014), that claims arising after
entry of a final settlement were not barred in a subsequent suit.
26

While the Court recognizes the instruction in Creech that an order pending on appeal is not
final for res judicata purposes, Creech also holds that “the second suit is not barred by res judicata
unless the plaintiffs had the opportunity in the first suit to fully and fairly litigate the particular
issue giving rise to the second suit.” Creech, 281 S.W.3d at 382. It is not clear whether YEI had
the opportunity to litigate any new claims after Crescent filed its appeal of the Order Regarding
Post Trial Motions, or how Plaintiffs could have pursued any new claims in the Tennessee Court
of Appeals. The only issue pending after remand from the court of appeals in May 2016 was the
division of the attorney fees between YEI and Yoe. Crescent Sock Co. v. Yoe, No. E2015-00948COA-R3-CV, 2016 WL 3619358, at *9 (Tenn. Ct. App. May 25, 2016). Moreover, both Creech
and Regions involved claims arising prior to commencement of the preclusive suit, unlike the case
at bar, where FITS Claims allegedly continued to arise until Defendants ceased production on
February 28, 2016.
Finally, as Plaintiffs point out, the Tennessee Court of Appeals has recently stated that
“[w]here there is any uncertainty [res judicata] does not apply.” Rainbow Ridge Resort, LLC v.
Branch Banking & Trust Co., 525 S.W.3d 252, 259 (Tenn. Ct. App. 2016) (quoting Justice v.
Justice, No. 01-A-01-9312-PB00541, 1995 WL 81414, at *2 (Tenn. Ct. App. Mar. 1, 1995)) (other
citations omitted).
The Court will therefore vacate the portion of the previous summary judgment order
dismissing Plaintiffs’ FITS Claims arising after April 22, 2015. These claims will be reinstated
pursuant to this order.

27

D.

Trade Secret Claims

Previously, the Court held that Plaintiffs’ FITS-only trade secrets claims11 asserted in
Count VII (injunctive relief – trade secrets) were barred by res judicata [Doc. 453 at Page ID #
15571]. The Court also held that res judicata applied to the extent Plaintiffs seek monetary
damages, costs or fees concerning Defendants’ alleged misappropriation of the FITS-only trade
secrets in Counts VI and XVI [id. at Page ID # 15572]. In light of the dismissal of these FITSonly trade secret claims/requests for relief and because Defendants were no longer producing FITS
(and because Plaintiffs offered no proof Defendants planned to use FITS-only trade secrets in the
future), the Court held that the declaratory relief Plaintiffs seek in Counts VI (declaratory judgment
– trade secrets) and XVI (trade secret misappropriation and unfair competition – Omni Wool
Tactical and Hiwassee Trading Company Socks) was moot to the extent it concerned FITS-only
trade secrets [id.].
Under the Tennessee Uniform Trade Secrets Act (“TUTSA”), “misappropriation” means:
(A) Acquisition of a trade secret of another by a person who knows
or has reason to know that the trade secret was acquired by improper
means; or
(B) Disclosure or use of a trade secret of another without express or
implied consent by a person who:
(i) Used improper means to acquire knowledge of the trade
secret; or
(ii) At the time of disclosure or use, knew or had reason to
know that that person’s knowledge of the trade secret was:
(a) Derived from or through a person who had
utilized improper means to acquire it;

11

The FITS-only trade secrets are those alleged trade secrets that Plaintiffs do not claims were
incorporated into the Omni Wool Tactical or Hiwassee Trading Company socks.
28

(b) Acquired under circumstances giving rise to a
duty to maintain its secrecy or limit its use; or
(c) Derived from or through a person who owed a
duty to the person seeking relief to maintain its
secrecy or limit its use; or
(iii) Before a material change of the person’s position, knew
or had reason to know that it was a trade secret and that
knowledge of it had been acquired by accident or mistake;
Tenn. Code Ann. § 47-25-1702(2).
It is unclear when the alleged FITS-only trade secret misappropriation took place, but
unlike the other FITS Claims (such as trademark infringement based on the sale of unauthorized
versions of FITS) which allegedly recurred throughout the pendency of the Chancery Court Case,
YEI contends in its motion for revision that “there was no infringement on YEI’s trade secrets
until over a year and a half after Crescent’s filing of the Chancery Court lawsuit.” [Doc. 459 at
Page ID # 15616]. In light of this representation, the Court finds that the FITS-only trade secret
misappropriation claims, including the associated request for damages and injunctive relief, should
not have been dismissed on res judicata grounds.12
The Court previously held that the declaratory relief Plaintiffs sought for FITS-only trade
secrets in Counts VI and XVI (a declaration that YEI is the owner of the trade secrets) was moot.
The existence of a trade secret, however, is an element of any misappropriation of trade secrets

12

The Court notes, however, that it is not at all clear from Plaintiffs’ third amended complaint
[Doc. 201] that the trade secret misappropriation claims only first arose over a year and a half after
the filing of the Chancery Court Case. The Court’s reinstatement of Plaintiffs’ trade secret claims
is based on YEI’s representation in the instant motion for revision that such claims did not arise
until “over a year and a half after Crescent’s filing of the Chancery Court lawsuit.” [Doc. 459 at
Page ID # 15616]. Plaintiffs will be bound by this representation and thus will not be permitted to
attempt to seek damages for any FITS-only trade secret claims that arose prior to the time period
referenced in the motion.
29

claim. See Tenn. Code Ann. § 47-25-1702(2) (defining “Misappropriation” as acquisition,
disclosure, or use of a “trade secret”). Because the Court will allow YEI to proceed on its FITSonly trade secret misappropriation claims for injunctive relief and for damages, the Court must
also necessarily allow Plaintiffs to seek declaratory relief that they are the owners of the FITSonly trade secrets (Counts VI and XVI). The Court will vacate the portion of its previous summary
judgment order dismissing Plaintiffs’ FITS-only trade secret claims, and the FITS-only trade secret
claims will be reinstated.
The Court also previously held that any relief Defendants seek in their counterclaims
concerning the FITS-only trade secrets was either moot or barred by res judicata [see Doc. 409 at
Page ID # 11495-96; see also Doc. 453 at Page ID # 15572]. The Court will vacate that portion
of its previous order and will allow these counterclaims to be reinstated.
E.

Crescent’s Alternative Arguments/Issues from Cross Motions for Summary
Judgment

In its response to Plaintiffs’ motion for revision, Crescent argues that Plaintiffs’ FITS
Claims should remain dismissed for the alternative reasons that they are barred by collateral
estoppel (issue preclusion), and because the terms of the Business Agreement did not require
Crescent to seek or receive Plaintiffs’ approval before producing and selling FITS after Yoe was
fired [Doc. 463 at Page ID # 15687-90]. Plaintiffs did not respond to these arguments in their
reply [see Doc. 464]. Defendants raised these or similar arguments in their original motion for
summary judgment, and the Court declined to address them at that time, because the Court
dismissed all of the FITS Claims on other grounds (primarily res judicata). The Court also declined

30

to rule on Plaintiffs’13 motion for partial summary judgment, which related only to their FITS
trademark infringement claims. The Court will address these issues now: first, Defendants’
argument that the FITS Claims are barred by collateral estoppel, and second, the parties’ respective
arguments concerning the Business Agreement/FITS license.
1. Collateral Estoppel
Under Tennessee law, collateral estoppel “operates to prevent relitigation of an issue which
has been previously determined between the same parties in another suit . . . .” Mountain Laurel
Assur. Co. v. Harber, No. 07-1105, 2008 WL 4107738, at *3 (W.D. Tenn. Aug. 29, 2008) (quoting
Dickerson v. Godfrey, 825 S.W.2d 692, 694 (Tenn. 1992)). The party asserting collateral estoppel
“has the burden of proving that the issue was, in fact, determined in a prior suit between the same
parties and that the issue’s determination was necessary to the judgment.” Id. (quoting Dickerson,
825 S.W.2d at 695).
Crescent argues:
The terms of the Business Agreement, which is the written
license for Crescent’s use of the FITS mark, were already
adjudicated in the state court action. The chancery court found the
Business Agreement to be an unambiguous, valid, and enforceable
contract. It construed the agreement’s terms, which were “definite
in scope” and “plain in language,” to mean inter alia that YEI owned
the FITS mark, that Crescent would pay royalties under the schedule
set forth in Paragraph 2, that Crescent had no obligations beyond its
royalty payments under the license, and that the license was nonexclusive. By its own terms, the Business Agreement was fully
integrated and required that any subsequent agreements relating to
or modifying it be in writing. On appeal, the Tennessee Court of
Appeals affirmed the chancery court’s findings and also added that
the Business Agreement was the only written contract between YEI
13

The Court notes that the motion is titled “Yoe Enterprises’ Motion for Partial Summary
Judgment,” [Doc. 322]. However, the motion for summary judgment is styled on the docket as
having been filed by both YEI and Yoe. The Court previously referred to the motion for summary
judgment as having been filed by “Plaintiffs” due to the styling on the docket; the Court will
therefore continue to refer to the motion as having been filed by “Plaintiffs,” for simplicity’s sake.
31

and Crescent. Thus, the FITS license has already been actually
litigated, previously adjudicated, and its interpretation was
necessary to the judgment rendered in state court.
[Doc. 463 at Page ID # 15687-88 (citations to the record omitted)].
Crescent overstates what was actually determined in the Chancery Court Case. As relevant
here, the chancery court held in its Order Regarding Post Trial Motions:
The court finds, and noted at the hearing, that the trial of this case
was tried over a period of several days, and the movant’s attorneys
had every opportunity to plead and to argue any issue pertaining to
the licensing agreement that they chose to argue. However, they
chose not to argue concerning the licensing agreement, and did not
request any declaration from this court concerning the various
essential terms of the agreement between the parties.
[Doc. 56-1 at Page ID # 628]. Thus, contrary to Crescent’s argument, it is clear that the chancery
court did not “previously determine” all of the terms of the Business Agreement to the extent it
operated as a license agreement. The chancery court did generally hold that all of the written
agreements between the parties (including the Business Agreement) were “definite in scope” and
“plain in language” [Doc. 24-8 at Page ID # 312], but given the statement from the chancery court
quoted above, the chancery court did not address whether there are additional terms to the
“license.” Nowhere did the chancery court expressly hold, as Crescent contends, that Crescent
“had no obligations beyond its royalty payments under the license.” [Doc. 463 at Page ID # 15688].
What the chancery court did hold at the pages cited by Crescent is that, under the Business
Agreement, YEI owned the socks brands Yoe developed, Crescent was required to pay royalties,
and that there “is nothing in the Business Agreement” that required Plaintiffs to reimburse Crescent
“for the costs expended in the development, manufacturing and marketing of new brands” or “for
any costs incurred or losses.” [Doc. 24-8 at Page ID # 302-03]. The chancery court further held

32

that Crescent did not have an exclusive license to produce FITS after terminating Yoe [Doc. 56-1
at Page ID 631], and finally that:
Mr. Yoe and YEI have established that the contracts in question in
this case are enforceable contracts. The contracts in this case were
written agreements executed by the officers and shareholders of
Crescent acting in their capacity as members of the Executive
Committee of Crescent’s Board of Directors. The court finds that
there is no question these actions were taken for the purpose of
retaining Mr. Yoe’s services as a key and/or vital employee. Their
actions were supported by valuable consideration: Mr. Yoe’s
continued employment on the one hand, and increased
compensation and benefits from Crescent on the other. The court
finds that the terms of the contracts are definite in scope, plain in
language and fair to all parties involved. The court specifically finds
that there has been no overt or implicit violation of Tennessee’s
public policy embedded in its provisions, and that there is no proof
of fraud on the part of any parties to the contracts.
[Doc. 24-8 at Page ID # 312-13]. When combined with the chancery court’s earlier statement
about the licensing agreement, it appears the chancery court did not hold that the Business
Agreement plainly defined the entire scope of the parties’ FITS license. The chancery court left
that question open because the parties did not request any declaration concerning the various
essential terms of the licensing agreement.
Accordingly, the Court finds that Plaintiffs are not collaterally estopped from arguing the
merits of their FITS Claims in Count I (Federal Trademark Infringement – Crescent); Count II
(Federal Trademark Infringement – Individual Defendants); Count V (Violation of the Lanham
Act, 15 U.S.C. § 1125(a)); Count VIII (Unfair or Deceptive Trade Practices Under Tenn. Code
Ann. § 47-18-101, et seq.); Count X (Unfair Competition); and Count XI (Breach of License
Agreement). In other words, collateral estoppel is not an appropriate basis for denying YEI’s
motion for reconsideration, and Defendants are not entitled to summary judgment on these Counts
based on collateral estoppel.
33

2. FITS License
The remaining issues go to the heart of the parties’ dispute over the FITS Claims. Plaintiffs
argued in their motion for summary judgment that the Court should “enter a judgment against
Crescent for infringing the FITS trademark,” and Plaintiffs “will address the damages that
Crescent’s infringement caused” at trial [Doc. 322 at Page ID # 6129]. Plaintiffs’ “Federal
Trademark Infringement” claims are asserted in Count I of the third amended complaint. Count I
alleges:
Crescent has exploited the Intellectual Property, more
specifically, YEI’s federally-registered “FITS®” and “Game
Knits®”14 trademarks, without authorization. Without authorization
or approval by YEI, it has utilized the marks in connection with
goods and products which have not been approved by YEI. Such
unauthorized conduct includes, among other things, advertising,
selling and marketing socks not manufactured pursuant to YEI’s
specifications or quality standards with the YEI Trademarks. In
addition, Crescent has used advertising and other materials which
display the YEI Trademarks which have not been approved or
authorized by YEI.

14

The Court notes that Plaintiffs do not seek summary judgment on any claims relating to Game
Knits. The Court denied Defendants’ motion for summary judgment on the Game Knits claims.
34

[Doc. 201 at Page ID # 2881].15
The Court pauses here to note that given the way Plaintiffs argue their motion, it appears
they are simply asking the Court to construe YEI’s licensing agreement with Crescent; specifically,
whether Crescent was permitted to make changes to FITS design and branding after terminating
Yoe, without obtaining Yoe’s preapproval. Plaintiffs describe the “single, straightforward legal
issue at the heart of [the] motion:”
Interference with control rights – Under federal law, a licensee
commits trademark infringement if it sells unapproved goods under
the licensor’s mark. Here, Crescent changed the colors, patterns,
design, raw materials, and packaging of YEI’s FITS-branded socks
without the approval of YEI and refused to allow YEI to supervise
or control Crescent’s use of the FITS mark. Did Crescent infringe
YEI’s FITS trademark?
[Doc. 326 at Page ID # 6265]. Plaintiff seek summary judgment that “Crescent infringed YEI’s
FITS trademark when it seized control over the FITS brand and [made alterations] without YEI’s
authority or approval between September 2013 and February 28, 2016.” [Doc. 326 at Page ID #
6288].

15

In Count II, Plaintiffs allege that Boyd and Allen are jointly and severally liable with Crescent
for the infringements, because Boyd and Allen “have personally authorized and/or taken part in
the infringing activities of Crescent and/or have specifically directed its employees to do so. The
individual Defendants are central figures in the infringements who have authorized and approved
the activities of Crescent described herein for their own personal gain.” [Doc. 201 at Page ID #
2882]. Plaintiffs do not address Boyd and Allen’s role in their motion for summary judgment;
therefore, the Court does not address Count II in this order.
It is possible that Plaintiffs intended to seek summary judgment on Count V – Violation of
the Lanham Act, 15 U.S.C. § 1125(a), as the Lanham Act does prohibit trademark infringements.
However, because Plaintiffs also include allegations of unfair competition in Count V [id. at Page
ID # 2883], it is not clear they intended to include Count V in their motion for summary judgment.
In addition, the Lanham Act is only mentioned once in their 25-page brief filed in support in their
motion, and then only in the context of Defendants’ now-abandoned laches defense [Doc. 326 at
Page ID # 6283]. The Court therefore does not consider whether Plaintiffs are entitled to summary
judgment on Count V (Violation of the Lanham Act, 15 U.S.C. § 1125(a)) in this order.
35

Defendants’ position, as mentioned above, is that “[b]ecause the Business Agreement did
not include approval or control provisions, Crescent is entitled to summary judgment as a matter
of law on YEI’s claims for infringement, unfair competition, and breach of license. For the same
reason, Allen and Boyd are entitled to summary judgment on YEI’s vicarious liability claim.”
[Doc. 321 at Page ID # 6032]. The claims on which Defendants seek summary judgment on this
basis are the FITS Claims in Counts I & II (Federal Trademark Infringement – Crescent, Boyd and
Allen), V (Violation of the Lanham Act, 15 U.S.C. § 1125(a)), VIII (Unfair or Deceptive Trade
Practices Under Tenn. Code Ann. § 47-18-101, et seq.), X (Unfair Competition), and XI (Breach
of License Agreement) [Doc. 321 at Page ID # 6033].
It is undisputed that “a party who holds a valid license to use a trademark and is not in
breach of the license cannot be an infringer of the licensed mark.” 4 McCarthy on Trademarks
and Unfair Competition § 25:30 (5th ed.) (citing Segal v. Geisha NYC LLC, 517 F.3d 501, 506
(7th Cir. 2008)) (hereafter, “McCarthy”). It is also undisputed that YEI granted a license to
Crescent to produce and sell FITS, and that Crescent can be liable for infringement if it failed to
operate within the terms of its license. See, e.g., Masters v. UHS of Del., Inc., 631 F.3d 464, 473
(8th Cir. 2011) (“In a typical trademark case, the plaintiff alleges that the defendant’s mark . . . is
confusingly similar to its own. . . . This case involves a different kind of comparison, i.e., between
the use of the mark the licensing agreement grants and UHS’s actual use of the mark. . . . [T]he
relevant criterion is the degree to which each party remained faithful to the terms of the license
agreement.” (citations omitted)).
In April 2009, Yoe, Boyd, and Allen signed an amendment to Yoe’s existing employment
contract. Although this was an amendment to Yoe’s employment contract (and not an agreement
with YEI), it discusses YEI’s license to Crescent:
36

Any and all new brands & related materials: developed, registered,
trademarked, copyrighted or otherwise started and or designed by
Crescent in years 2009 through [Yoe’s] employment:
will be owned in full and completely by Yoe Enterprises.
(At the time of this signing, none of these “new brands” have
been trademarked.)
YEI will license the “brands” to Crescent for $1.00 a year.
....
IF

[Yoe] leaves the company apart from the
wishes of Sandra and Cathy without a
mutually approved license agreement.

THEN Crescent has the right to accept or reject a
manufacturing/sourcing agreement with
terms that would allow them exclusivity to
providing socks at 5% Royalty fee.
Minimums to be agreed upon at such time.
The other conditions would be similar to the
LIG contract. Crescent would be responsible
for remaining competitive in pricing and
quality in order to maintain the agreement.
....
Conclusion
This is meant to be a binding addendum to Bob’s employment
contract. While reasonable efforts will be made by all parties to
have attorneys memorialize the intents of this agreement with
appropriate “legalese” – until such time as that is accomplished, the
above is our legal and binding agreement when signed by all 3
Executive Committee members: Bob Yoe, Cathy Allen & Sandra
Boyd.
[Doc. 326-2 at Page ID # 6344-45].
A later Executive Employment Contract, signed February 15, 2012, states that it supersedes
Yoe’s prior employment contracts [Doc. 326-9 at Page ID # 6428]. This Executive Employment
Contract does not discuss licensing. The Court brings this point up because in Count XI (Breach
of License Agreement) of the third amended complaint (on which Defendants seek summary
37

judgment), Plaintiffs seem to contend that the employment contracts form part of the licensing
agreement [Doc. 201 at Page ID # 2890]. It is clear, however, that the February 2012 Executive
Employment Contract is the controlling employment contract, and it does not discuss licensing.
Moreover, YEI (the owner of the intellectual property) is not a party to any of the employment
contracts.
YEI is a party to the Business Agreement [Doc. 24-3], which was executed on September
4, 2012, several months after the Executive Employment Contract. The Business Agreement
provides, in relevant part:
WHEREAS, Yoe and Crescent have from time to time
entered into certain business agreements relative to branding and
intellectual property rights that are not memorialized in the
Employment Contract;
WHEREAS, the Parties desire to memorialize the prior
business agreements concerning branding and intellectual
property rights in a single agreement;
NOW, THEREFORE, in consideration of the mutual
covenants set forth herein, and for other good and valuable
consideration, . . . the Parties, intending to be legally bound, hereby
agree as follows:
1.
Ownership of Intellectual Property. Any and all new
brands, and other intellectual property relating to such new brands,
that are developed, registered, trademarked, copyrighted, invented,
started, conceived or designed by Crescent, Yoe and/or YEI from
January 1, 2009 through the termination of Yoe’s employment with
Crescent (the “Intellectual Property”) shall be 100% owned by YEI.
Crescent covenants and agrees that, on or after the date of this
Agreement, it shall perform, execute and/or deliver, . . . any and all
such further acts and assurances as necessary to effectuate, evidence
and consummate the assignment of the Intellectual Property to YEI,
including without limitation executing any such documentation as is
requested.
2.
Royalties as to “Fits” and “Jack’s” Brands. Crescent
shall pay royalties to YEI relative to the “Fits” brand and the
“Jack’s” brand as follows:
38

[$1.00 per year for 2013-14; 5% of “Net Sales” for 2015-16
and thereafter].
The term, “Net Sales”, means gross sales minus customer
deductions, credits issued to customers, returns and bad debts.
Royalties shall be paid to YEI on or before 30 days after the end of
each calendar quarter.
3.
Licensing. On or before 1 year after the execution
of this Agreement, YEI and Crescent will enter into an
agreement for licensing/manufacturing/sourcing relative to the
Intellectual Property which includes terms and conditions
similar to the LIG contract and which incorporates by reference
the provisions of Section 2, above.
4.

Miscellaneous.

(a)
This Agreement shall be binding upon the
Parties and their legal representatives, predecessors, successors and
assigns as of the Effective Date notwithstanding the contemplation
of a future agreement among the Parties.
(b)
The Parties acknowledge that they have had
input into the drafting of this Agreement or, alternatively, have had
an opportunity to have input into the drafting of this Agreement.
Accordingly, in any construction to be made of this Agreement, it
shall not be construed for or against any party, but rather shall be
given a fair and reasonable interpretation, based on the plain
language of the Agreement and the expressed intent of the Parties.
(c)
No change, alteration, amendment or
modification to this Agreement shall be valid and enforceable
unless stated in writing and duly executed by all Parties. No
waiver shall be binding unless executed in writing by the Party
making the waiver.
(d)
This Agreement may be executed in two or
more counterparts, including without limitation by facsimile or
electronic signature, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(e)
Each Party represents and warrants that the
individual signing this Agreement on behalf of such Party is duly
authorized and fully competent to do so.
39

[Id. (emphasis added)]. The language of the Business Agreement indicates the parties intended to
reduce all of their prior agreements concerning their intellectual property into one agreement. It
is clear that YEI would license FITS to Crescent, and that the parties intended to enter into a more
detailed licensing agreement in the future. Unfortunately, they never did, and Yoe was eventually
fired. Crescent continued to produce FITS after Yoe was fired (as it was required to do by the
chancery court injunction), and it is undisputed that Crescent had a license to produce FITS during
this time.
On June 10, 2015, YEI notified Crescent that it was terminating the license, and on June
19, YEI notified Crescent that it was rescinding the termination temporarily (thereby temporarily
reinstating the license) [Doc. 350-1]. On July 31, 2015, YEI notified Crescent that it would fully
reinstate the license, and that “Crescent should continue to comply with the temporary injunction
that was entered by the Chancery Court of McMinn County.” [id. at Page ID # 8506]. Crescent
stopped manufacturing FITS on February 28, 2016, when YEI took over production [Doc. 377-6].
Although the Court has located nothing in the massive record showing that YEI formally
terminated the license again, there is a letter from counsel for YEI to counsel for Crescent
indicating that YEI would take over responsibility for producing and selling FITS beginning
February 28, 2016 [Doc. 377-6].
Appealing to general principles of contract law, which undisputedly applies to license
agreements, Crescent argues that the Business Agreement is plain and unambiguous, and did not
require Crescent to seek YEI’s (or Yoe’s) approval before making changes to FITS after Yoe was
fired [see, e.g., Doc. 321 at Page ID # 6032-36]. In effect, Crescent’s argument is that by executing
the Business Agreement without including any quality control provisions, YEI gave up the right
to control Crescent’s use of the FITS mark, other than by YEI terminating the Business Agreement.
40

Plaintiffs argue that the Court must look beyond the Business Agreement to substantive trademark
law and the parties’ course of dealings, wherein Yoe himself controlled and oversaw the
production, marketing and sales of FITS, to determine what was permitted under the license and
whether Crescent breached the license when it sold socks that incorporated changes which YEI
did not approve [Doc. 382 at Page ID # 10997-11002]. Crescent responds that the details of the
parties’ prior course of dealings amount to parol evidence, which should be not be introduced
because the Business Agreement is unambiguous. Moreover, Crescent argues, “[a]ny finding of a
previously or later-executed, non-written agreement would eschew the Business Agreement’s
integration clause and prohibition against non-written amendments and modifications.” [Doc. 463
at Page ID # 15688]. If YEI did not think the Business Agreement was an acceptable license,
Crescent argues, it should have terminated the license or negotiated new terms.
“The cardinal rule for interpretation of contracts is to ascertain the intention of the parties
and to give effect to that intention, consistent with legal principles.” Nat’l Healthcare Corp. v.
Baker, No. 3:14-cv-02015, 2016 WL 3232725, at *11 (M.D. Tenn. June 13, 2016) (quoting Bob
Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578, 580 (Tenn. 1975))
(applying Tennessee law). To ascertain the parties’ intent, the Court must look to the plain
meaning of the words in the document and interpret the contractual language. Crye-Leike, Inc. v.
Carver, 415 S.W.3d 808, 816 (Tenn. Ct. App. 2011). “Additionally, the court may consider the
situation of the parties, the business to which the contract relates, the subject matter of the contract,
the circumstances surrounding the transaction, and the construction placed on the contract by the
parties carrying out its terms.” Simonton v. Huff, 60 S.W.3d 820, 825 (Tenn. Ct. App. 2000)
(citations omitted). Nevertheless, “[w]hen the language of the contract is plain and unambiguous,

41

the court must determine the parties’ intention from the four corners of [the] contract, interpreting
and enforcing it as written.” Id. (citations and footnote omitted).
“Since courts should not look beyond a written contract when its terms are clear, the parol
evidence rule provides that contracting parties cannot use extraneous evidence to alter, vary, or
qualify the plain meaning of an unambiguous written contract.” Schwartz v. Diagnostix Network
Alliance, LLC, No. M2014-00006-COA-R3-CV, 2014 WL 6453676, at *9 (Tenn. Ct. App. Nov.
17, 2014) (quoting GRW Enters., Inc. v. Davis, 979 S.W.2d 606, 610-11 (Tenn. Ct. App. 1990)).
This is because “allowing a party to introduce evidence of oral statements which contradict the
express terms of a written contract defeats the very purpose of committing agreements to writing.”
Tidwell v. Morgan Bldg. Sys., Inc., 840 S.W.2d 373, 376 (Tenn. Ct. App. 1992) (citation omitted).
Regarding the parol evidence rule, the Tennessee Court of Appeals has further explained:
The rule appears to be quite all-encompassing. However, the courts
have been reluctant to apply it mechanically and have now
recognized that it has numerous exceptions and limitations.
Thus, the rule does not prevent using extraneous evidence to prove
the existence of an agreement made after an earlier written
agreement, or to prove the existence of an independent or collateral
agreement not in conflict with a written contract. In each of these
circumstances, the courts have conceived that the parol evidence is
not being used to vary the written contract but rather to prove the
existence of another, separate contract.
Schwartz, 2014 WL 6453676, at *9 (quoting GRW Enters., Inc., 797 S.W.3d at 610-11) (emphasis
in original).
Where, as here, a “term is left open for future negotiation, there is nothing more than an
unenforceable agreement to agree.” Cadence Bank, N.A. v. The Alpha Trust, 473 S.W.3d 756, 774
(Tenn. Ct. App. 2015) (citation omitted). Accordingly, as Crescent points out, the reference to the
“LIG contract” in the Business Agreement is not an indication that the parties actually incorporated
the terms of that contract into their license.
42

While the Business Agreement does not contain any terms granting YEI control/approval
rights of FITS design and branding, it does not grant Crescent total control over the use of the FITS
mark, either. Moreover, the parties had a course of dealing after execution of the Business
Agreement that could have established some sort of approval/decision-making procedure.16 And,
while the Business Agreement states that it can only be modified in writing, a separate agreement
concerning control/approval of FITS design and branding would not actually modify the Business
Agreement, because the Business Agreement is silent on this issue. Not only does the Business
Agreement not contain design/branding control provisions (or other provisions one might typically
find in a trademark license agreement), it expressly recognizes that silence by indicating the
parties’ intent to enter into a more detailed licensing agreement in the future. Crescent itself
acknowledges that parol evidence is admissible to prove the existence of an “independent or
collateral agreement . . . made after an earlier written agreement [which is] not in conflict with [the
written agreement].” [Doc. 394 at Page ID # 11262 (quoting Schwartz, 2014 WL 6453676, at *9)].
The Court therefore agrees with Plaintiffs that the “absence of a written control provision
in the Business Agreement does not entitle Crescent to summary judgment on YEI’s FITS claims”
[Doc. 382 at Page ID # 10997]. The Court will not deny YEI’s motion for reconsideration (or
grant Defendants’ motion for summary judgment) on the remaining FITS Claims based on the lack
of a written control/preapproval provision favoring YEI in the Business Agreement.
In support of their motion for summary judgment on their trademark infringement claims
(and in opposition to Defendants’ arguments for summary dismissal of Plaintiffs’ FITS Claims),

16

In their reply brief in support of their motion for summary judgment, Plaintiffs write that their
course of conduct regarding FITS “continued up to and beyond the execution of the Business
Agreement.” [Doc. 395 at Page ID # 11282].
43

Plaintiffs argue that their right to control FITS arose from the parties’ undisputed course of
dealings and from substantive trademark law.
In Tennessee, “a contract can be express or implied and either written or oral, but
regardless, an enforceable contract ‘must result from a meeting of the minds of the parties in
mutual assent to terms, must be based upon sufficient consideration, must be free from fraud or
undue influence, not against public policy and sufficiently definite to be enforced.’” Constr. Crane
& Tractor, Inc. v. Wirtgen America, Inc., No. M2009-01131-COA-R3-CV, 2010 WL 1172224, at
*7 (Tenn. Ct. App. Mar. 24, 2010) (quoting Moody Realty Co., Inc. v. Huestis, 237 S.W.3d 666,
674 (Tenn. Ct. App. 2007)) (other citations omitted). “A contract must be of sufficient explicitness
so that a court can perceive what are the respective obligations of the parties.” Doe v. HCA Health
Servs. Of Tenn., Inc., 46 S.W.3d 191, 196 (Tenn. 2001) (internal quotation marks and citations
omitted).

“In a contract implied in fact, the conduct of the parties and the surrounding

circumstances show mutual assent to the terms of the contract.” Thompson v. Hensley, 136 S.W.3d
925, 930 (Tenn. Ct. App. 2003) (citation omitted).
Regarding the parties’ course of dealings, Defendants concede that during his tenure as
CEO of Crescent, “Mr. Yoe oversaw all of Crescent’s business, including its creation,
manufacture, marketing and sale of socks under the FITS brand and others. He supervised all
Crescent employees, including those employees responsible for manufacturing, marketing, and
selling FITS branded socks.” [Doc. 377 at Page ID # 10842]. Defendants argue that Yoe was not
acting on behalf of YEI at this time because he was an employee of Crescent, but they cite no
authority to support their argument that Mr. Yoe’s dual role is dispositive. Defendants chose to
hire Yoe, the sole owner of YEI, to act as CEO of Crescent. Defendants also chose to allow YEI,
Yoe’s company, to retain ownership of all intellectual property associated with sock brands Yoe
44

developed while working for Crescent.

YEI acts through Yoe, its sole owner.

Certainly

Defendants do not point to any document indicating the parties agreed that any action Yoe took
with regard to FITS was taken on behalf of Crescent rather than YEI. Indeed, the agreements
between the parties seem to indicate that Yoe’s creative work with regard to FITS or other socks
would benefit both YEI and Crescent.
Plaintiffs contend that Yoe:
oversaw the development of the unique knitting machine programs
required to manufacture the socks. He made decisions about the
socks’ colors and patterns. He chose what raw materials went into
the socks. He approved the design of the socks’ packaging. He
decided what styles of socks to include in the FITS lineup. In
essence, he and the small “FITS Team” working under his
supervision made FITS work.
[Doc. 382 at Page ID # 11001-02]. In his affidavit submitted in support of Plaintiffs’ motion for
summary judgment, Yoe states that, during his time at Crescent, “I or a member of my FITS team
under my direct supervision were the only people who could approve the packaging and
advertising for FITS.” [Doc. 326-4 at Page ID # 6373].
It is unknown whether Yoe delegated any of his decision-making or quality control
authority to the “FITS team” who apparently were all employed by Crescent. It does appear that
Yoe (as the sole owner of YEI) played a significant role in the design and branding of FITS, and
exercised quality control over use of the FITS trademark. Moreover, as discussed exhaustively in
this opinion, the parties agreed to entry of an injunction in the Chancery Court Case, which
seemingly sought to preserve the status quo of operations about one month prior to Yoe’s
termination. This injunction required Crescent to use the “proper materials, proper packaging,
proper technology for manufacturing FITS®, proper manufacturing processes, and using all of the
same specifications required to manufacture FITS® that were in place as of August 15, 2013 and
45

using all of the same specifications required by the patents held by Yoe Enterprises.” [Doc. 24-7
at Page ID # 272-73].
Nevertheless, it is not entirely clear from the parties’ course of dealings that they mutually
agreed YEI (through Yoe) would have final approval rights over all aspects of FITS; that is,
whether every design and marketing choice for FITS had to be made or approved by Yoe before
the sock could be sold. Could other Crescent employees veto or insist on certain design choices
based on business and market considerations, for example, provided the “special bulbous heel and
. . . square toe”17 features are incorporated? Summary Judgment in favor of Plaintiffs on their
infringement claims on this basis is therefore inappropriate.
Plaintiffs also argue in their motion for summary judgment that substantive trademark law
grants them the right to control all aspects of the design and branding of FITS. They argue any
FITS socks had to be made and sold pursuant to the specifications created by Yoe prior to his
firing, and that any FITS socks which did not conform to those specifications constitute an
infringement of the FITS trademark. McCarthy on Trademarks, a treatise cited by both parties,
states that:
Genuine Goods: The Trademark Owner is in Control. A
trademark carries with it a message that the trademark owner is
controlling the nature and quality of the goods or services sold under
the mark. Without quality control, this message is false because
without control of quality, the goods or services are not truly
“genuine.” . . . . As has been remarked:
One of the most valuable and important protections
afforded by the Lanham Act is the right to control the
quality of goods manufactured and sold under the
holder’s trademark. . . . For this purpose the actual
quality of the goods is irrelevant: it is the control of
quality that a trademark holder is entitled to
maintain.
17

See Doc. 201 at Page ID # 2871.
46

The Trademark Owner Has a Duty to Control. Thus, not only does
the trademark owner have the right to control quality, when it
licenses, it has the duty to control quality. Judge Posner [has] stated
that an ex-licensee was a trademark infringer because the trademark
owner is no longer able to exercise quality control over one with
whom he longer has a license relationship. . . .
McCarthy, § 18.42. Modern rule of licensing—Licensing with quality control (footnotes and
citations omitted).
In Zino Davidoff SA v. CVS Corp., 571 F.3d 238, 240 (2d Cir. 2009), a case relied upon by
Plaintiffs, the United States Court of Appeals for the Second Circuit affirmed the trial court’s
determination that the owner of a fragrance trademark was entitled to a preliminary injunction
prohibiting CVS from selling bottles of the fragrance that had the UPC removed. The court found
that the UPC “acts as a quality control mechanism which enables [the trademark owner] to protect
the reputation of its trademarks by identifying counterfeits and by protecting against defects.” Id.
The court found that, regardless of whether the fragrance bottles with the UPC removed were, in
fact, genuine, the trademark owner was still likely to succeed on its infringement claims against
CVS, reasoning:
Where the alleged infringer has interfered with the
trademark holder’s ability to control quality, the trademark holder’s
claim is not defeated because of failure to show that the goods sold
were defective. That is because the interference with the trademark
holder’s legitimate steps to control quality unreasonably subjects
the trademark holder to the risk of injury to the reputation of its
mark. “One of the most valuable and important protections afforded
by the Lanham Act is the right to control the quality of the goods
manufactured and sold under the holder’s trademark.” El Greco
Leather Prods. Co. v. Shoe World, Inc., 806 F.2d 392, 395 (2d
Cir.1986). In attaching its mark to its goods over time, a holder
assures consumers that the goods conform to the mark holder’s
quality standards.
Id. at 243-44 (emphasis added).
47

In FURminator, Inc. v. Kirk Weaver Enterprises, Inc., 545 F. Supp. 2d 685, 686 (N.D. Ohio
2008), another case cited by Plaintiffs, a trademark holder contracted with a company to destroy a
defective batch of pet grooming tools. Rather than destroying the tools, the company sold them to
another party, and eventually they ended up in the hands of Weaver Enterprises, which sold the
tools to consumers at deeply discounted prices. Id. at 687-88. The trademark holder sued Weaver
for trademark infringement. Weaver argued that the tools were genuine and that they were an
innocent third party purchaser of the tools. Id. at 688-89. The court granted summary judgment
to the plaintiff, finding that the sales of the defective tools were unauthorized and the tools could
not be considered authentic. Id. at 690. The court noted that the Lanham Act “affords the
trademark holder the right to control the quality of goods manufactured and sold under its
trademark. Indeed, . . . the actual quality of the goods is irrelevant; it is the control of quality that
a trademark holder is entitled to maintain.” Id. at 690 (internal quotation marks and citations
omitted).
Crescent distinguishes both of these cases by pointing out that the infringers, unlike
Crescent, were not licensees of the trademark.
Robert Trent Jones II, Inc. v. GFSI, Inc., 537 F. Supp. 2d 1061 (N.D. Cal. 2008), a case
relied on by both parties, involves an alleged infringement by a licensee. The licensor agreed, in
a written license agreement, to allow the licensee to sell trademarked products in certain retail
stores, but not in “discount stores.” Id. at 1064. The licensor discovered the licensee was selling
its goods at a number of stores which the licensor believed were discount stores, and the licensee
admitted its intention to continue selling to one store in particular, The Golf Warehouse (“TGW”).
The licensor then filed suit, seeking a preliminary injunction barring the continued sale of its
products in TGW. The court noted that, due to the license, the sales were not “inherently
48

unauthorized,” and that the resolution of the suit depended on the proper interpretation of the term
“discount store” in the license agreement. Id. at 1066. After considering parol evidence, the court
found it could not conclude TGW was a “discount store” and denied plaintiff’s request for a
preliminary injunction. Id. at 1067, 1069.
Crescent’s use of the FITS trademark was likewise not “inherently unauthorized” because
it did have a license. Robert Trent Jones II is distinguishable, however, because it involved the
court’s interpretation of a specific written term of a contract. See also Lars v. San Siro, Inc., No.
96 Civ. 9499 (JFK), 1997 U.S. Dist. LEXIS 9398, at *25 (S.D.N.Y. May 19, 1997) (“Because Mr.
Lars specifically reserved the right to make . . . inspections of production samples in order to
control the quality of the clothing bearing his Mark, the fact that [d]efendant did not obtain all such
approvals prior to distribution and sale renders the unapproved garments for the Spring 1997 line
nongenuine.” (citations omitted)).
In Miller v. Glenn Miller Productions, Inc., 318 F. Supp. 2d 923, 936 (C.D. Cal. 2004),
aff’d, 454 F.3d 975 (9th Cir. 2006), a case discussed by both parties, the defendant argued that an
alleged license agreement18 “could not have conveyed a trademark license because the agreement
did not contain a provision for the supervision and control over the goods and services GMP [the
defendant] produced under the license.” The court rejected that argument, reasoning:
It is well established that when the owner of a trademark licenses
the mark to others, he retains a “duty to exercise control and
supervision over the licensee’s use of the mark.” However, a
provision recognizing the licensor’s supervision and control is not
an essential element of a trademark license. See Dawn Donut Co. v.
Hart’s Food Stores, Inc., 267 F.2d 358, 368 (2nd Cir. 1959) (“The
absence . . . of an express contract right to inspect and supervise a
licensee’s operations does not mean that the plaintiff's method of
18

In that case, it was to the defendant’s benefit for the agreement to be construed as a “license of
Glenn Miller’s right to publicity” rather than a trademark license. Id. at 934.
49

licensing failed to comply with the requirements of the Lanham Act.
Plaintiff may have in fact exercised control in spite of the absence
of any express grant by licensees of the right to inspect and
supervise”); Bunn–O–Matic Corp. v. Bunn Coffee Service, Inc., 88
F. Supp. 2d 914 (C.D. Ill. 2000) (holding that an agreement
conveyed a trademark license despite the agreement’s lack of an
explicit quality control provision). A license agreement need not
contain an express quality control provision because trademark
law, rather than the contract itself, confers on the licensor the right
and obligation to exercise quality control. Therefore, the lack of a
quality control provision in the 1956 agreement does not mean that
Helen Miller could not have conveyed a valid trademark license to
GMP.
Id. at 936-37 (emphasis added; some citations omitted).
In Trailers International, LLC v. Mastercraft Tools Florida, Inc., No. 3:15-cv-00171-BR,
3:15-cv-00767-BR, 2016 WL 4154935 (D. Ore. Aug. 4, 2016), a case cited by Plaintiffs, the
trademark owner/licensor granted a license to the defendant/licensee to manufacture and distribute
trailers that incorporated trademarked technology. The memorandum of understanding (“MOU”)
which contained the license did not contain written quality control provisions. Id. at *6. In April
2011, the licensor began sending notices of default to the licensee “regarding the [licensee’s]
alleged failure to abide by specific terms in the MOU and their alleged failure to manufacture
trailers to Plaintiffs’ standards.” Id. at *1. In October 2011, the licensor sent the licensee a letter
which specifically stated “[t]he use of any and all intellectual properties related to the agreement
and UtilityMate brand is hereby revoked as of the date of this letter.” Id. at *6. The licensee
continued to manufacture and sell the trailers, and the licensor sued for trademark infringement
relating to the sales after the letter was sent. Id. at *2
The court held that the lack of written quality control provisions in the MOU did not
foreclose the licensor’s claims, reasoning that “the Lanham Act provides a trademark holder with
the right to control the quality of goods manufactured and sold under their trademark, to cancel
50

orders, and to forbid distribution of products that have not been approved by the trademark holder.”
Id. at *6 (citing El Greco Leather Prods. Co., Inc. v. Shoe World Inc., 806 F.2d 392 (2d Cir. 1986)).
As a result, the court held that the “license agreement need not contain an express quality-control
provision because trademark law rather than the contract itself confers on the licensor the right and
obligation to exercise quality control.” Id. (citing Miller v. Glenn Miller Prods., Inc., 454 F.3d
975, 992 (9th Cir. 2006)). Ultimately, the court denied the licensor’s motion for summary
judgment, finding that there was a question of fact regarding “whether Plaintiffs adequately
communicated” the quality control standards to the defendants. Id. In the Trailers International
case, the licensor affirmatively instructed the licensee to stop distributing the products once the
licensor discovered the quality issues, and sought relief only regarding trailers distributed
thereafter.

How that fact affected the court’s analysis is unclear; however, that fact does

distinguish the Trailers International case from the case at bar, where the parties agreed to a
continuing relationship as defined by the Chancery Court Case injunction.
The language regarding the right of a licensor to exercise quality control in the treatise and
cases quoted above is influential. Nevertheless, after carefully considering the issues as presented
by the parties, the Court remains unconvinced that general principles of trademark law can impose
specific quality control or approval provisions between the parties where they were not otherwise
bargained for. While a licensor must exercise quality control to avoid abandoning a trademark
under the concept of “naked licensing,” even Plaintiffs acknowledge “total control is unnecessary.”
[Doc. 326 at Page ID # 6279]. Yet they ask the Court to read into their license a provision for
YEI’s total control such that preapproval from Yoe for any change to FITS was required.
At least one court has held that “[t]he fact that a license does not condition use of a mark
on the licensor’s quality standards does not establish the issue of infringement if the licensee was
51

in fact granted the right to produce products without the licensor’s control.” Sleash, LLC v. One
Pet Planet, LLC, No. 3:14-cv-00863-ST, 2014 WL 3859975, at *14 (D. Ore. Aug. 6, 2014). In
Sleash, a case not cited by the parties, the trademark owners argued in part that “the principle of
‘naked licensing’ means that [the licensee’s] production of the Sleash Pet Specialty Products that
are inconsistent with Sleash’s quality standards subjects [the licensee] to liability for trademark
infringement.” Id. at *13. The court found that:
[T]he mere fact that Sleash has an independent duty to maintain
certain quality standards in order to avoid abandoning its mark does
not establish trademark infringement. As a result, the resolution of
Sleash’s trademark infringement argument turns on whether the
specific grant clause in the License Agreement conditioned [the
licensee’s] use of the Slinger® and Sleash® marks on Sleash’s
“joint” approval pursuant to Section 5.4 [of the license agreement].
Id. at *14 (citation omitted). The court ultimately found Sleash was not likely to succeed on the
merits of its argument concerning the language of the license agreement, and denied Sleash’s
motion for a preliminary injunction. Id. at *18-20.
The Court again acknowledges that trademark owners, as a general rule, have the right and
duty to control the use of their trademarks. Whether and how they exert that right and duty clearly
varies from case to case. Plaintiffs ask the Court to find, as a matter of law, that: “Crescent
infringed YEI’s FITS trademark when it seized control over the FITS brand and altered FITS
products’ packaging, colors, patterns, and designs without YEI’s authority or approval between
September 2013 and February 28, 2016.” [Doc. 326 at Page ID # 6288]. The Court finds there are
questions of fact concerning what changes (if any) Crescent was permitted to make, as well as
what changes Crescent actually did make and when. Summary judgment in favor of Plaintiffs on
their trademark infringement claims is therefore inappropriate.

52

To summarize, the Court’s holding is that: 1) Plaintiffs’ FITS Claims arising after April
22, 2015, are not barred by res judicata and will be reinstated; 2) Plaintiffs’ FITS-only trade secret
claims should not have been dismissed and will also be reinstated; 3) Defendants are not entitled
to summary judgment on Plaintiffs’ remaining FITS Claims based on collateral estoppel or the
absence of written control/approval provisions in the Business Agreement; and 4) Plaintiffs are
not entitled to summary judgment on Count I of their third amended complaint (Federal Trademark
Infringement – Crescent).
IV.

CONCLUSION
For the foregoing reasons, and as set forth herein, Plaintiffs’ motion for revision [Doc. 458]

is GRANTED IN PART and DENIED IN PART. The Court’s previous order on the summary
judgment motions [Doc. 453] is VACATED IN PART to the extent it dismissed Plaintiffs’ FITS
Claims arising prior to April 22, 2015, and to the extent it dismissed Plaintiffs’ FITS-only trade
secret claims and Defendants’ FITS-only trade secret counterclaims.
The Court hereby reinstates Plaintiffs’ FITS Claims asserted in Counts I, II, V, VIII, X, XI,
and XIII of the third amended complaint, to the extent these claims arose after entry of the chancery
court’s Order Regarding Post Trial Motions on April 22, 2015. All FITS Claims arising prior to
April 22, 2015, remain dismissed pursuant to the Court’s November 14, 2017, memorandum and
order [Doc. 453].
All FITS-only trade secret claims asserted in Counts VI, VII, and XVI are hereby
reinstated. Defendants’ FITS-only trade secret counterclaims are hereby also reinstated.
V.

SCHEDULING ORDER/STATUS CONFERENCE
At the parties’ request, the Court previously set aside the following dates from the amended

scheduling order: 1) the deadline for submission of the final pretrial order, 2) the date for the final
53

pretrial conference, and 3) the trial date [Docs. 215, 456]. With the issuance of this Order, the
Court finds it necessary to order new dates, as follows:
1.

Special Requests to Instruct for Jury Trial:

Pursuant to Local Rule 51.1, requests for jury instructions shall be submitted to the Court
no later than June 25, 2018, and shall be supported by citations of authority pursuant to Local
Rule 7.4. A copy of the prepared jury instructions should be sent as an electronic mail attachment
to lee [e-mail].
The parties shall confer and submit a joint proposal for jury instructions to the extent
possible. Before submitting proposed instructions to the Court, the parties must attempt to resolve
any disagreements. If not submitted jointly, each set of proposed instructions must include a
certification that the movant has in good faith conferred or attempted to confer with the other
parties in an effort to resolve any disputed instructions.
The Court uses the Sixth Circuit Criminal Pattern Jury Instructions as its model in
formulating the final instructions given to the jury; therefore, all proposed instructions must follow
their form of the pattern instructions. The parties shall not submit proposed instructions for matters
common to both civil and criminal cases and covered by the pattern instructions unless they seek
to depart from t hose standard instructions.
The parties shall also submit no later than June 25, 2018, proposed verdict form(s),
including any proposed special interrogatories for the jury.
2.

Final Pretrial Conference:

(a)
A final pretrial conference will be held in this case on July 23, 2018, at 2:00 p.m.
[EASTERN], before United States Magistrate Judge Susan K. Lee, 4th Floor Courtroom, U.S.
Courthouse, 900 Georgia Avenue, Chattanooga, Tennessee. All lawyers who plan to participate
in the trial must be present in person at the final pretrial conference. The parties shall prepare and
submit a proposed final pretrial order to the Court on or before June 25, 2018. The proposed final
pretrial order shall include a chart setting forth any outstanding objections to exhibits and
deposition designations, along with responses to the objections and citations to appropriate
authority.
(b)
The Clerk may provide counsel with a jury list containing names and personal
information concerning prospective petit jurors (hereafter, “the jury list”). Counsel and any other
person provided with the jury list may not share the jury list or information therein except as
necessary for purposes of jury selection. Following jury selection, counsel and any other person
provided the jury list must return to the Clerk the jury list and any copies made from the jury list
or destroy them.
3.
Trial: The Trial of this case will be held before United States Magistrate Judge
Susan K. Lee with a jury beginning on August 20, 2018. The trial is expected to last two weeks.
54

Counsel shall be present at 8:30 a.m. to take up any preliminary matters which may require the
Court’s attention. The parties shall be prepared to commence trial at 9:00 a.m. on the date which
has been assigned. If this case is not heard immediately, it will be held in line until the following
day or any time during the week of the scheduled trial date. SHOULD THE SCHEDULED
TRIAL DATE CHANGE FOR ANY REASON, THE OTHER DATES CONTAINED IN
THIS ORDER SHALL REMAIN AS SCHEDULED. SHOULD THE PARTIES DESIRE A
CHANGE IN ANY OF THE OTHER DATES, THEY SHOULD NOTIFY THE COURT
AND SEEK AN ORDER CHANGING THOSE DATES.
4.

Status Conference:

The Court will conduct a status conference on May 31, 2018, at 9:30 a.m. [EASTERN],
4th Floor Courtroom, U.S. Courthouse, 900 George Avenue, Chattanooga, Tennessee. During the
conference, the Court will require the parties to inform the Court of the status of each of the
pending motions, including whether any agreed resolutions have been (or are likely to be) made
to narrow the issues presented or resolve the motion in its entirety. This includes:
1. Crescent’s motion in limine (“MIL”) to exclude opinions of D. Michael Costello19
[Doc. 309];
2. Crescent’s MIL to exclude the opinions of Stuart Seltzer20 [Doc. 313];
3. Crescent’s MIL to exclude the opinions of Pete Canalichio [Doc. 317];
4. Plaintiffs’ MIL to exclude testimony of Thomas Lee [Doc. 328];
5. YEI’s motion to strike expert testimony of Esther Roberts [Doc. 329];
6. Crescent’s MIL to exclude opinions of Mitchell Beckler21 [Doc. 334];
7. Crescent’s MIL to exclude opinions of Oscar Nardi [Doc. 337];
19

Crescent should address this motion in light of the Court’s order at Docket No. 366, as well as
the Court’s rejection in the summary judgment order of Defendants’ argument concerning Mr.
Costello’s method of calculating damages and discussion of Hamilton-Ryker Group, LLC v.
Keymon, No. W2008-00936-COA-R3-CV, 2010 WL 323057 (Tenn. Ct. App. Jan. 28, 2010)
(discussing TUTSA) [see Doc. 453 at Page ID #15583-85].

20

Both parties should be prepared to address the relevance of the testimony of their respective
licensing experts in light of the Court’s holding in this Order.

21

Both parties should be prepared to address the standards that apply and whether Mr. Beckler is
a witness specially employed or retained.
55

8. Crescent’s motion to strike supplements to expert reports and rebuttal reports of
Stuart Seltzer and Pete Canalichio [Doc. 343];
9. Plaintiffs’ motion to strike Defendants’ supplemental disclosure of Bill Reveal
[Doc. 396];
10. Crescent’s first MIL to preclude testimony and argument about irrelevant issues
from state court case [Doc. 411];
11. Crescent’s second MIL to preclude reference to discovery disputes [Doc. 413];
12. Crescent’s third MIL to preclude use of the term “trade secret” by YEI’s experts
[Doc. 415];
13. Plaintiffs’ MIL concerning Yoe’s salary, issues litigated in the Chancery Court
Case, and the parties’ post-appeal settlement agreement in the Chancery Court Case
[Doc. 417];
14. Plaintiffs’ MIL to prohibit and exclude testimony of Erich Joachimsthaler Relating
to Licensing [Doc. 418]; and
15. Plaintiffs’ motion for permission to submit confidential documents [Doc. 419].
In addition, the Court previously entered a memorandum and order [Doc. 452] concerning
Crescent’s motion for sanctions pursuant to Federal Rule of Civil Procedure 37(e) for alleged
spoliation of electronically stored information [Docs. 288 & 289]. The Court’s order states:
Defendants mainly seek a ruling preventing or limiting
YEI’s attempt to recoup any of its alleged $2 million in costs for
recreating the FITS sock-related technology. Given the Court’s
contemporaneous ruling on the summary judgment motions, it is not
clear to the Court how any such costs could be recovered in the
claims that remain pending in this action, but the Court has
insufficient information at this time and the parties have not been
able to consider the summary judgment ruling yet. If Plaintiffs
intend to attempt to pursue such costs given the Court’s grant of
partial summary judgment to Crescent in this action, the Court will
hear from the parties at the final pretrial conference as to what, if
any, non-monetary remedial measures are proper in light of this
Order.
The Court will RESERVE ruling on the imposition of any
monetary remedial measures until any post-trial motions are
56

addressed so that the parties may be fully heard at an evidentiary
hearing regarding the propriety and extent of any such measures
without distracting either the Court from addressing the numerous
motions recently filed or the parties’ trial preparations.
[Doc. 452 at Page ID #15543].
At the status conference, the Court will also hear from the parties on the remaining issues
regarding spoliation sanctions. Specifically, the Court will hear from the parties regarding the
legal basis for the $2 million damages request for the out-of-pocket expenses Plaintiffs allegedly
incurred in having to recreate the FITS programs, how the spoliation order impacts Crescent’s
second motion in limine to preclude reference to discovery disputes [Doc. 413], and possible
remedial measures for the spoliation [see Doc. 452].
In addition, the Court previously reserved ruling on any trade secret misappropriation claim
relating to the three socks knitted on a 108-needle machine and the one sock knitted on an 84needle machine [Doc. 453 at Page ID # 15582-83]. Defendants argued in their summary judgment
motion that both of Plaintiffs’ technical experts admitted Plaintiffs have no evidence that the
alleged trade secrets were used to make these four types of socks [Doc. 325 at Page ID # 618788]. The Court noted that Plaintiffs’ witness Mitchell Beckler testified his report did not contain
an opinion that trade secret numbers 1, 2, 3, 6 and 21 were used in these four types of socks, but
that his testimony was less clear regarding whether trade secret numbers 13, 14, and 16 were
incorporated [Doc. 453 at Page ID # 15582]. The Court further noted that Plaintiffs’ witness Oscar
Nardi’s testimony regarding whether the trade secrets were incorporated into these socks was even
less clear than Beckler’s [id. at Page ID # 15582-83]. If the parties have not otherwise resolved
this issue prior to the status conference, Plaintiffs should be prepared to point out the record
evidence concerning whether any trade secrets were incorporated into these four socks and the
specific portions of the expert’s reports addressing each sock and trade secret.
57

Finally, the parties must discuss bifurcation and/or trifurcation of the trial prior to the
conference and come prepared to present their position(s) regarding same.
SO ORDERED.
ENTER:

s/fâátÇ ^A _xx
SUSAN K. LEE
UNITED STATES MAGISTRATE JUDGE

58