Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-5_07-cv-05009/USCOURTS-arwd-5_07-cv-05009-10/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement

---

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

ROTOWORKS INTERNATIONAL LIMITED PLAINTIFF

v. Civil No. 07-5009

GRASSWORKS USA, LLC;

GRASSWORKS!!! L.L.C.;

ROBERT D. UMBERSON a/k/a/BOBBY 

UMBERSON; and LINDA K. REED DEFENDANTS

O R D E R

Now on this 4th day of September, 2007, come on for

consideration the following motions:

* Plaintiff's Motion For Rule 11 Sanctions (document #77);

* Plaintiff's Motion For Extension Of Time To Respond To

Defendants' Second Set Of Interrogatories And Requests

For Production Of Documents (document #85); and

* defendants' Motion For Leave To File Sur Replies And For

Extension Of Time (document #88);

and from said motions, the responses thereto, and the supporting

documentation, the Court finds and orders as follows:

1. In its Amended Complaint, plaintiff Rotoworks

International Limited ("Rotoworks") alleges that defendants are

liable to it for trademark infringement by counterfeiting and

implied passing off, in violation of 15 U.S.C. §1114(1), and for

trade dress and trademark infringement, in violation of 15 U.S.C.

§1125(a). 

Plaintiff also alleges that defendants' use of the website

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www.rotowiper.com (the "Website") to solicit customers for its

knock-off products violates the Anticybersquatting Consumer

Protection Act, 15 U.S.C. §1125(d), and seeks injunctive relief in

the form of transfer of ownership of rotowiper.com (the "Domain

Name") and removal of all references to the Rotowiper product from

the sales literature and the website of the defendants.

The Amended Complaint prays for an extension of the

preliminary injunction entered on March 5, 2007, to defendant

Metal Works, L.L.C.; for permanent injunctive relief; for damages,

attorney's fees and costs; for "divestiture" of the Domain Name;

for removal of all references to Rotowiper products from

defendants' product literature and grassworks.net website; and for

destruction of all knock-off products manufactured by defendants.

Defendants have filed a Counterclaim alleging that Rotoworks

and its agents have tortiously interfered with their contracts and

prospective business expectancies.

2. The motions now under consideration all relate to the

Counterclaim. Plaintiff contends that the Counterclaim was

interposed for an improper purpose, and that it should not have to

answer discovery requests addressed to the Counterclaim until this

Court has resolved its Rule 11 motion.

3. F.R.C.P. 11(b) provides that the filing of a pleading

constitutes certification by the attorney that, to the best of his

knowledge, information, and belief, "formed after an inquiry

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Rule 11 also contains a "safe harbor" provision requiring the movant to serve a 1

motion for Rule 11 sanctions on the party from whom such sanctions are sought, and give

that party 21 days to withdraw the challenged pleading before filing the motion with the

Court. There is no dispute that plaintiff complied with this provision.

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reasonable under the circumstances," 

* the pleading is not presented "for any improper purpose,

such as to harass or to cause unnecessary delay or

needless increase in the cost of litigation";

* the claims are warranted by existing law or a

nonfrivolous argument for a change in existing law; and

* the factual allegations have evidentiary support, or --

if specifically so identified -- are likely to have

evidentiary support, given a reasonable opportunity for

discovery.

In evaluating a motion for sanctions under Rule 11, the Court

applies a standard of "objective reasonableness." Isakson v.

First National Bank, Sioux Falls, 985 F.2d 984 (8th Cir. 1993).

1

4. Defendants interposed their Counterclaim on May 29,

2007. In it, they make the following assertions:

* that plaintiff has "utilized the claims asserted in the

original Complaint as a means to tortiously interfere

with the contracts and prospective business expectancies

of Counterplaintiffs";

* that plaintiff has "attempted to use the discovery

process as a self-help remedy and vehicle of retaliation

against Counterplaintiffs so that Counterplaintiffs

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would be monetarily injured regardless of the success of

Rotoworks' claims for trademark infringement and trade

dress infringement";

* that plaintiff "did not send a cease and desist letter

to Counterplaintiffs before filing suit";

* that plaintiff "did not terminate the stipulated

authority of Defendants Umberson and Grassworks USA to

advertise, market, offer and sell Rotowiper products

prior to the filing of the original Complaint"; 

* that plaintiff "has not negotiated in good faith to

settle all outstanding claims once suit had been brought

despite bona fide offers from Counterplaintiffs";

* that plaintiff has "forced Counterplaintiffs to incur

substantial legal fees to protect their confidential

information and to defend trademark claims that

ultimately will be deemed invalid";

* that "[u]pon information and belief, Rotoworks agents

have caused valuable, confidential information of

Counterplaintiffs to be disclosed to and used by

Rotoworks for unfair competition against

Counterplaintiffs";

* that plaintiff has "used telephone records of

Counterplaintiffs and also of Michelle Thomas, who is

not a party to this suit, to make random harassment

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calls to third parties";

* that plaintiff "has called not only customers but also

other persons who are completely unrelated to the sale

or offer of sale by Counterplaintiffs of herbicide

applicators";

* that plaintiff "has contacted a party to ask questions

about this case, although the party's only association

with any party in this suit was that it had sold sheep

to Bobby Umberson and Michelle Thomas";

* that plaintiff "contacted an employee of Defendants and

asked him about the 'Rotowiper' he had purchased,

although he had never purchased a herbicide applicator";

* that "[m]any of these persons being contacted by

Rotoworks who are not currently customers do represent

prospective future customers of Counterplaintiffs, and

Rotoworks is damaging the prospective business

expectancy from these persons";

* that plaintiff is using the "confidential phone records,

bank records and other confidential business and

customer information as part of a 'fishing expedition'

to compete unfairly with Counterplaintiffs and try to

destroy the reputations and businesses of

Counterplaintiffs"; and

* that plaintiff "is trying to tarnish the reputation of

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Counterplaintiffs in the community and to cause third

parties to cease doing business with Counterplaintiffs."

As a remedy for these alleged wrongs, the defendants pray for

$1,000,000 in damages and "permanent injunctive relief requiring

the immediate return of all confidential information of

Counterplaintiffs." They also ask the Court to prohibit Rotoworks

"from the use or disclosure of such information and from the

contacting of any customers or acquaintances of

Counterplaintiffs."

5. Tortious interference with contracts and business

expectancies is a common law cause of action as to which Arkansas

state law supplies the rule of decision. Erie Railroad Co. v.

Tompkins, 304 U.S. 64 (1938). In order to prevail on the cause of

action, the defendants would have to prove four elements:

* the existence of a valid contractual relationship or

business expectancy;

* knowledge on the part of the plaintiff of such

contractual relationship or business expectancy;

* intentional interference causing a breach of the

contract or a termination of the business expectancy;

and

* resultant damage.

Alvarado v. St. Mary-Rogers Memorial Hospital, Inc., --- Ark. App.

---, --- S.W.3d ---, 2007 WL 1490941 (2007).

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It must also be proven that any interference, to be

actionable, was improper. Fisher v. Jones, 311 Ark. 450, 844

S.W.2d 954 (1993). In determining whether interference was

improper, the Court considers the following factors:

* the nature of Rotoworks' conduct;

* Rotoworks' motive;

* the interests of the defendants with which the conduct

of Rotoworks allegedly interfered;

* the interests sought to be advanced by Rotoworks;

* the social interests in protecting the freedom of action

of Rotoworks, and the contractual or business interests

of the defendants;

* the proximity of Rotoworks' conduct to the alleged

interference; and

* the relations between the parties.

Fisher, 311 Ark. at 459, 844 S.W.2d at 959.

6. As can be seen from the foregoing, the fulcrum for

decision of the Rule 11 issue is the question of propriety, both

with respect to Rule 11 itself, and with respect to the cause of

action alleged in the Counterclaim. Under Rule 11, a pleading

must not be presented "for any improper purpose, such as to harass

or to cause unnecessary delay or needless increase in the cost of

litigation." Under Arkansas law, any interference with contract

or business expectancy, to be actionable, must be improper. 

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The Court has conducted a rather extensive review of the

history of this case, and the factual submissions of the parties,

and is persuaded that the Counterclaim was interposed for an

improper purpose or purposes, and further, that any interference

Rotoworks may have caused with defendants' contracts or business

expectancies was not improper.

7. The allegations of the Counterclaim all have to do with

Rotoworks' conduct in connection with the pending litigation: 

* that it brought suit without warning the defendants; 

* that has used information obtained through discovery to

locate witnesses;

* that it has not settled the matter; and 

* that the suit is costing defendants a lot of money to

defend.

There is, of course, no legal requirement that a plaintiff

notify a prospective defendant of the intent to file suit, nor any

requirement that the parties settle. Nor is the simple fact that

filing of a lawsuit imposes defense costs on the defendants

actionable. In responding to the Motion For Sanctions, defendants

do not even argue that these allegations might in some way justify

the filing of the Counterclaim, and the Court will not further

address them. The focus of the Counterclaim, the pending motions,

and this Court's analysis, is on the use made, or allegedly made,

by plaintiff of information learned during discovery.

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8. Early in the discovery process, plaintiff took steps to

obtain the telephone records and bank records of the defendants,

both by serving subpoenas on third parties and by propounding

written discovery to the defendants. Defendants resisted the

discovery of this information vigorously but unsuccessfully, and

obviously feel very aggrieved that the information was obtained by

the plaintiff. 

A review of the relevant docket entries reflects defendants'

dissatisfaction, and their unwillingness to accept the Court's

rulings on the issues, as well as their inability to come forward

with evidence to support their position as to the discovered

information:

* On March 5, 2007, the Court granted preliminary

injunctive relief to Rotoworks. As part of its Order,

it directed defendants to "cooperate fully" in allowing

Rotoworks to inspect and photograph their manufacturing

facility and inventory. A date was scheduled for

inspection, but when that date came, defendants insisted

upon an "attorney's eyes only" agreement that would

prevent Rotoworks' counsel from disclosing information

gained in the inspection to their client. When

Rotoworks' counsel refused to enter such an agreement,

the inspection was denied. This situation resulted in

Rotoworks filing its first Motion To Compel, on March

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Defendants also filed a motion to quash the subpoenas, which was denied. 2

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20, 2007.

* Defendants urged the Court to deny the Motion To Compel,

asserting that what was inside the facility amounted to

"trade secrets and confidential and proprietary

information of Defendants." 

* On April 4, 2007, the Court entered an Order allowing

Rotoworks' attorneys, and its investigator Steve Mankin

("Mankin") to enter the facility and photograph all of

its contents in plain view, but prohibiting them from

opening drawers or inspecting the contents of closed

containers.

* On March 27, 2007, defendants filed their first Motion

For Protective Order, asking for "limitations" on the

use plaintiff could make of information sought via

certain subpoenas for their telephone records.2

Defendants argued that the telephone records amounted to

"confidential, proprietary information and trade secrets

within the meaning of" A.C.A. §4-75-601(4). They also

contended that Rotoworks "appears to be using discovery

as a retaliatory remedy than as an efficient tool to

discover the necessary facts to try the case," and

"wants the ability to use the confidential personal,

private and commercial information of Defendants for any

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purpose it sees fit." Defendants wanted all telephone

records and business records made subject to an

"attorney's eyes only" limitation, and wanted to limit

plaintiff's contact with witnesses to the scheduling and

taking of depositions. 

* On April 11, 2007, the Court denied the Motion For

Protective Order, finding that defendants had failed to

show the telephone records were trade secrets, and

further finding, upon in camera examination of the

records, that they did not merit protection under

F.R.C.P. 26(c). The Court also found that defendants

had failed to show that disclosure of the records would

be harmful to their interests, and it refused to "assume

that plaintiff intends to act in bad faith or otherwise

misuse these records."

* Defendants immediately moved for reconsideration. They

supported this motion with the Declaration of Bobby

Umberson, in which Umberson averred that Rotoworks would

use the telephone records to "taint any testimony by

customers who are potential witnesses in this case by

intimidating them into agreeing with the claims of

Plaintiff because they are afraid of getting involved in

a lawsuit"; that "there is a high probability that

[Rotoworks] will destroy my business by making biased

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comments to potential witnesses in the community"; and

that "[i]t is clear that Plaintiff, Plaintiff's

attorneys and their private investigator are on a slash

and burn vendetta against me personally to retaliate for

my competition with Plaintiff, and that now they are

attempting to use the discovery process of this court

proceeding as a front to retaliate against me on the

streets of Lincoln, Arkansas." Defendant Linda Reed,

and Umberson's business associate Michelle Thomas

(principal of defendant Grassworks!!! L.L.C.), offered

similar -- although less hyperbolic -- Declarations.

* On April 25, 2007, the Court denied defendants' Motion

For Reconsideration, finding both their arguments and

their evidence unpersuasive. Not only did the Court

find no basis to prevent discovery of the telephone

records, it specifically noted with regard to

defendants' request to limit Rotoworks' access to the

records that, "as the subject records are the legitimate

fruits of discovery and do not merit protection via

protective order, the Court finds no reasonable basis

for placing such limitations on the use of this

information." The Court reiterated that it would "not

assume that plaintiff intends to act in bad faith or

otherwise misuse these records. Thus, while defendants

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speculate that plaintiff will use the subpoenaed records

to bias potential witnesses and retaliate against

defendants, such unsupported contentions do not

establish that the disclosure of these records will be

harmful to defendants' interests in the information

contained therein."

* Within an hour of entry of the April 25 Order,

defendants filed yet another Motion For Protective

Order. This motion did not address the telephone

records, focusing instead on information sought in

Plaintiff's First Interrogatories and Requests for

Production of Documents, including customer lists, email traffic, and financial information relating both to

defendants' sale of Rotowipers, and to their other

business interests. Defendants argued that the reasons

given for the discovery requests were "mere pretext for

Rotoworks to gain information that it can destroy

Defendants' business interests in retaliation for its

competition with Rotoworks." Defendants asked the Court

to limit disclosure of any such information to counsel

only, and to prohibit any contact with defendants'

customers other than to arrange for and take depositions

of them. This motion was supported by the same

Declarations of Umberson, Reed, and Thomas as the Motion

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For Reconsideration. The accompanying brief opened by

accusing Rotoworks of "engag[ing] in a full-scale attack

upon Defendants . . . and all business assets they own."

The brief went on to argue that the information sought

qualified as trade secrets under A.C.A. §4-75-601, and

to assert that "[i]f Rotoworks is allowed free access

and use of this information, it is likely that Rotoworks

and its attorneys and their agents will use the

information to steal customers of Defendants or to

tarnish Defendants' reputation in the community and

damage Defendants' business interests and ability to

compete as part of Rotoworks' ongoing efforts to

retaliate against Defendants." Defendants contended

that "[i]t is clear that Rotoworks and its attorneys

have no real need for the Unrelated Confidential

Information they are requesting except (1) to engage in

a wholesale fishing expedition for discovery, (2) to run

up legal fees for themselves and Defendants and (3) to

harass and retaliate against Defendants for their past

competitive activities." They argued that "[i]n no

event should Plaintiff Rotoworks itself be permitted

access to Defendants' customer lists due to the unfair

competition and irreparable harm that would result to

Defendants." Attorney use of the information, they

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argued, should be limited to scheduling and taking

depositions.

* On May 8, 2007, the Court denied defendants' Second

Motion For Protective Order. Although noting that the

motion was untimely, and that defendants had been

uncooperative in the discovery process, the Court did

not deny the motion on that basis alone. It addressed

the substantive merits of the motion and found them

lacking. It found that defendants had failed to show

that the requested information amounted to protectable

trade secrets, or that disclosure of the information

would be harmful to their interests, and refused yet

again to "speculate" that Rotoworks would act in bad

faith or abuse the discovery process.

All of the foregoing legal skirmishing took place before

defendants filed their Counterclaim. Thus the Court had ruled --

three times, unequivocally -- that defendants had failed to show

that any of the information requested in discovery, or from third

parties, amounted to trade secrets or was entitled to protection

under F.R.C.P. 26(c). It had also considered defendants' repeated

assertions that Rotoworks would misuse the information to their

detriment, and found no evidence that such would occur. Neither

defendants nor their attorney had come forward with any factual

basis to support their contentions that the information was

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confidential, or that Rotoworks would misuse it. If they had had

such information, the Court believes they would have presented it

in connection with the motions discussed above. It was in this

legal posture and evidentiary context that defendants filed the

Counterclaim.

9. Events subsequent to the filing of the Counterclaim

confirm the Court's finding that defendants had no factual support

for the Counterclaim. Umberson was deposed on June 20, 2007. He

described the manufacturing facility for which he had claimed

"attorney's eyes only" protection as a "rather ordinary" place

where he manufactured ordinary, nonpatented stuff. As for the

customer information he claimed to be a trade secret, he testified

that he rarely contacted past customers, because they already had

a weed wiper and not many of them would need a second one. He did

not recontact "old potential sales," and usually did not even

follow up with people who requested information, other than to

send them literature.

When asked for all facts he knew of which would support the

Counterclaim, Umberson knew of only four calls by Mankin: one to

an employee (who he admitted was "continually talking about how

good our units are and how good they'll work" and had not stopped

doing so); one to "a gentleman in Texas" (who "confirmed his

support" for Umberson); one to the father of Umberson's business

associate, Michelle Thomas; and one described as "Linda got a call

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that we're suspicious of." In spite of the continued support

shown by those he knew had been contacted, he testified that these

calls led him to wonder "how many other people have [sic] Mr.

Mankin browbeat and -- and got them where they're just going to

crawl in a hole and not do anything?" He also testified that

"[i]f he keeps . . . getting in touch with my -- my past

customers, it will affect my future customers, because word-ofmouth sales are very good sales." He did not know of anything

negative that any of those accused in the Counterclaim had said

about him, but stated that "I don't know what you're capable of."

When asked how Rotoworks was engaging in unfair competition,

Umberson testified that its website now says they "have a super

importer that is just full of service . . . implying that I was

inadequate service [sic]."

Umberson had no information that he was being damaged, or

that Rotoworks (as opposed to Rotoworks' attorneys and

investigator) had received any of the information discovered in

this lawsuit. He testified "I have none, other than the fact that

you have clearly stated that you can give it to him [Neil Barker,

principal of Rotoworks]. So I'm assuming that you have given it

to him. So I'm assuming that Neil Barker has given it to Rafe

Essary [Rotoworks' new U.S. distributor]. And I'm assuming that

damages are being done." He also testified that "there could be

damages. How much, I don't have any idea. It could be

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substantial. It depends on how far you and your people want to

go. Right now I don't know that you're stopping at anything."

When asked how he arrived at the sum of $1,000,000 as

damages on the Counterclaim, Umberson testified "[b]ecause I have

no idea how long the ongoing effects of this is going to have,

because your folks have my phone records. Your folks have my

invoices. Your folks have everything of mine. . . . you can reach

out and affect a million dollars worth of potential sales very

easily."

Linda Reed was asked how Rotoworks has used her "confidential

information," and responded "I don't know that they have yet. But

if they have it, I don't know if they can -- if they would." She

thought the subpoenas "put a red flag up" to their banks and

vendors. 

Reed had even less knowledge of any "harassing" phone calls

to customers than did Umberson. The "suspicious" call referred to

by Umberson was described by Reed as follows: "I received a phone

call from somebody in this area that, when I answered, didn't talk

to me." She hit dial return, and "then it comes up, 'this number

is unknown'," and she "automatically assumed it was Mankin." She

also thought it was "a pretty good assumption" that Mankin had

called everyone listed in her phone records.

Reed had heard about the call to the Texas gentleman, and

thought there had been a harassing call made to Umberson, although

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Umberson did not mention such a call in his deposition.

Reed acknowledged that she could not prove anything with

regard to specific future customers, and that "you can't call them

future customers 'cause we really -- none of us know who future

customers are." Like Umberson, she related unfair competition by

Rotoworks to the content of its website -- to the effect that the

company now has "a new and better" U.S. distributor -- which she

described as "demeaning us; that we weren't good."

When asked whether Rotoworks or its new U.S. distributor were

misusing her "confidential information," Reed only offered vague

speculation such as "they could," and "I have no reason to believe

they haven't." She had no information that Rotoworks had done

anything that would affect any future customer of defendants, but

had concerns that the calls would lead customers to tell their

neighbors "'that Weed Wiper is under legalities or whatever.'

It's just giving us a black eye."

Michelle Thomas, principal of defendant Grassworks!!! L.L.C.,

had even less to go on in asserting the Counterclaim than Umberson

or Reed, complaining only that Umberson had been "absent more the

past six months" because of his involvement in the lawsuit and

needing to be at more trade shows to earn money for legal fees,

which had caused her a hardship in conducting her business. 

The only use of telephone numbers of which Thomas was aware

was that her father had been "contacted by someone, asking if he

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had any knowledge or if he had any referrals concerning

Rotowipers." She had no information suggesting that this call was

harassing in nature, although her father was upset by it because

"[h]e's very angry about my involvement in this lawsuit."

The deposition testimony of Umberson, Reed, and Thomas

indicates that even in mid-June -- some three weeks after the

Counterclaim was filed -- the defendants had nothing more than

speculation upon which to base their assertion that they were

entitled to $1,000,000 in damages for the use by Rotoworks of

information it had legitimately obtained through discovery and

investigation. They could, thus, have had no such information at

the time the Counterclaim was filed -- nor could their attorney --

and it was not objectively reasonable for them to file the

Counterclaim under those circumstances.

10. The utter lack of a factual basis for the Counterclaim

creates a strong inference that it was filed for some purpose

other than to assert a right to a remedy warranted by the law and

the evidence, and, therefore, for an improper purpose. The prayer

of the Counterclaim points that inference toward the conclusion

that the purpose of the Counterclaim was to harass and intimidate

Rotoworks, stifle use of discovered information, and ultimately

delay resolution of this case. Without any evidentiary support to

back it up, defendants sought damages of $1,000,000. The prospect

of having to pay such a sum as the price for taking discovery --

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even if remote -- might well intimidate even the most stalwart of

attorneys.

In addition, the Counterclaim prays for "permanent injunctive

relief requiring the immediate return of all confidential

information of Counterplaintiffs," and asks the Court to prohibit

Rotoworks "from the use or disclosure of such information and from

the contacting of any customers or acquaintances of

Counterplaintiffs." This is clearly relief aimed at stopping the

discovery process, and -- just as clearly -- it is relief which

had already been denied by this Court on multiple occasions. 

The foregoing facts lead the Court to conclude that the

Counterclaim was presented for an improper purpose, thus violating

Rule 11.

11. The conduct of defendants' attorney likewise indicates

an intention to use the Counterclaim -- and other assertions of

"confidentiality" -- to intimidate Rotoworks and its counsel.

About 30 pages into Umberson's deposition, after an exchange of

the most mundane information, defendants' attorney suddenly

informed plaintiff's counsel that he was "going to designate this

deposition and the deposition of Ms. Reed and Ms. Thomas as

confidential." The depositions of Reed and Thomas had already

been taken, and -- like that of Umberson -- they contained nothing

that could reasonably be claimed as confidential. This is

especially true given the Court's repeated rulings on the issue.

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When Rotoworks' attorney questioned defense counsel about why

he was making the "confidential" designation, counsel stated "[w]e

can designate something as confidential based on its got

confidential information of ours. If you don't treat it as

confidential, you do so at your own peril. . . . we intend to

appeal the court's order that this information is not

confidential. So at such time it is ultimately resolved on

appeal, we'll deal with what the implications are." 

The tenor of this exchange is such as to convince the Court

that defendants and their attorney intended to intimidate

plaintiff and its attorney by holding over their heads the threat

of some future consequence for going forward with normal discovery

and trial of this case.

12. Defendants' arguments in response to the Motion For Rule

11 Sanctions have little merit. They first assert that a

settlement demand submitted by plaintiff on June 12, 2007, is

evidence that Rotoworks is "seeking to run Defendants out of

business" and "demonstrate[s] the bad faith motivations that

Rotoworks has in this case." The settlement offer asks for a cash

payment funded in part by liquidation of the facility where

defendants manufacture weed wipers, and for an agreement to

refrain from manufacturing or selling weed wipers for ten years.

The Court is not persuaded that this settlement offer

justifies the Counterclaim, for three reasons. First, it was made

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after the Counterclaim was filed. Second, it only seeks to

prevent defendants from operating their weed wiper business, and

has nothing to do with the various other businesses they operate.

Third, the settlement offer was just that, an offer. It could be

ignored, turned down, or countered, without consequence other than

the non-settlement of the case.

Defendants also repeat their contention -- repeatedly

rejected by this Court -- that because Rotoworks' counsel intended

to share what it had learned in discovery with its client, an

inference that the client "wants to use the confidential

information of Defendants to destroy their businesses is not an

unreasonable conclusion to reach from these facts." The argument

that a party will do anything it can do is mere speculation,

probative of nothing. While nonlawyers such as the defendants

might be forgiven for indulging it (at least they might forgiven

if the Court had not ruled to the contrary so many times), an

attorney of long experience, such as defendants' counsel,

certainly knows better.

Defendants also suggest that their Counterclaim might be

supported because Umberson "thought" he saw plaintiff's attorneys

drive by his manufacturing facility, and "thought" he saw them in

Lincoln, Arkansas. They suggest that it might be justified

because Umberson was concerned that if someone had his bank

records, and a video of "what's going out the door and being

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shipped out" and "a matching production cycle" with "a window of

purchases" they could "figure out our cost of production pretty

easy." Again, these contentions are based on mere speculation,

and do not justify the Counterclaim.

Defendants also contend that the Affidavit of Steve Mankin

supports their Counterclaim. That Affidavit -- like the

settlement letter -- postdates the filing of the Counterclaim and

thus could not have justified it. The Affidavit also does not

provide any factual support for the Counterclaim. In it, Mankin

avers that he did not "randomly" call phone numbers from

defendants' telephone records, but rather attempted (by comparing

the phone records with other documents produced in discovery) to

determine which phone numbers were likely to reach people who

would be appropriate witnesses in this case, such as "persons who

wrote a check or email requesting a genuine Rotowiper unit but

whose invoice listed a GrassWorks Weed Wiper or other product name

that indicated a domestic unit was being switched out for a

genuine Rotowiper unit." 

Mankin averred that he had made some 74 calls to selected

persons, in which he "maintained a professional demeanor," was

"not harassing or threatening," and did not make "disparaging

statements about Defendants or their products." Mankin recorded

the calls, and the recordings have been provided to the

defendants. 

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The transcripts of three of Mankin's phone calls are made

exhibits to Defendants' Response To Plaintiff's Motion For Rule 11

Sanctions. Those transcripts do not indicate that Mankin did

anything that would prejudice any witness, or that would prejudice

defendants. He did not inform his contacts that there was a

lawsuit, or indicate any partisanship in the matter.

Defendants also argue that the Counterclaim is "a compulsory

counterclaim that had to be asserted or it would be waived."

F.R.C.P. 13(a) provides that "[a] pleading must state as a

counterclaim any claim that -- at the time of its service -- the

pleader has against an opposing party if the claim: (A) arises out

of the transaction or occurrence that is the subject matter of the

opposing party's claim." It would require a contorted -- and in

the Court's view totally unjustified -- reading of this Rule to

find that it requires the filing of a counterclaim any time a

party feels -- rightly or wrongly -- that discovery is being

abused. Discovery "arises out of" the conduct of the lawsuit

itself, not the transaction or occurrence that led to the filing

of the lawsuit.

13. Taking all of the foregoing into consideration, the

Court concludes that neither the defendants nor their attorney, at

the time of filing the Counterclaim, had a factual basis -- or a

reasonable expectation of discovering a factual basis -- to assert

that Rotoworks or its agents were interfering with any contractual

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relationship or business expectancy on the part of defendants.

The Court also concludes that the conduct alleged to have taken

place -- that of Rotoworks' investigator contacting witnesses

using the discovered telephone records -- was not wrongful

interference even if it should ultimately be found to be

interference, because it was a legitimate use of discovery and

investigation to prepare for trial of this case.

In addition to the fact that the Counterclaim was not

supported by the law or the evidence when it was filed (nor

thereafter), the Court also finds that it was filed for improper

purposes, i.e., to harass and intimidate plaintiff and its

attorneys; to interfere with discovery; to seek to circumvent the

Court’s multiple rulings concerning discovery; and to delay the

resolution of this case.

These findings lead inevitably to the conclusion that

defendants and their attorney have violated Rule 11.

14. Having found that Rule 11 was violated, the Court takes

up the issue of what sanctions are appropriate for such violation.

It is readily apparent from the foregoing analysis that the

Counterclaim should be stricken and the Court will so order.

Accordingly, plaintiffs will not be required to respond to

defendants' discovery requests, insofar as they are related solely

to the Counterclaim, and not to the issues raised by the Amended

Complaint and the Answer in this case. 

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 The Court also finds it appropriate to require defendants to

pay the attorney's fees and costs incurred by plaintiff in

addressing the Counterclaim and it will so order. 

In addition to these sanctions, the Court is obliged to

consider whether it should impose a separate monetary sanction on

defendants' counsel for the continued assertion of claims which

this Court has repeatedly rejected. Counsel's conduct has

required the unnecessary expenditure of time not only by

plaintiff, but also by the Court. When a ruling on an issue has

been made, counsel and the litigants they represent are expected

to accept that ruling and conduct the case in light of that ruling

-- regardless of whether they agree with it. If they disagree

with a ruling, their remedy is by appeal, and not -- as happened

in this case -- by threatening the opposing party with some

unspecified consequence should that party follow the Court's

rulings and those rulings later be reversed on appeal. 

The Court believes that defense counsel, Gary Speed, as an

experienced attorney, is aware of these guidelines, and that he

has flouted them in this case. For this reason, the Court finds

that a monetary sanction of $1,000.00 should be imposed on Mr.

Speed personally, to be paid by him and not by his clients. This

sanction is to be paid into the Registry of the Court, rather than

to plaintiff.

15. Finally, the Court expresses its displeasure with the

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unprofessional bickering the parties and their counsel have

continually engaged in with regard to discovery in this matter.

The Court’s review of the depositions submitted in support of the

various motions, and the letters and e-mails of the attorneys to

one another, reminds it of a playground dispute and does not

reflect favorably on the participants. While the emotional and

unnecessarily disputatious conduct of non-lawyer parties can,

perhaps, be understood, the Court expects better of the attorneys

and neither understands nor condones such behavior on their part.

The Court expects these professionals to conduct themselves as

such, and to focus on the resolution of genuine issues, rather

than using this Court as an arena to air their personal disputes.

IT IS THEREFORE ORDERED that Plaintiff's Motion For Rule 11

Sanctions (document #77) is granted, and the following sanctions

are imposed on defendants for violation of that Rule:

* defendants' Counterclaim is hereby stricken and held for

naught, and plaintiff need make no response thereto;

* to the extent that any discovery propounded by

defendants to plaintiff relates solely to the issues

raised by the Counterclaim, plaintiff is not required to

further respond thereto;

* plaintiff is entitled to an award of its reasonable

attorney's fees and costs incurred in responding to the

Counterclaim and preparing the Motion For Rule 11

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Sanctions, and is directed to file documentation of

those expenses within fourteen (14) days of this Order;

defendants will be allowed ten (10) days thereafter to

file any objections they may have to such documentation;

* defendant's attorney, Gary Speed, is assessed a sanction

of One Thousand Dollars ($1,000.00), to be paid by him

personally and not by his clients, into the Registry of

the Court.

IT IS FURTHER ORDERED that Plaintiff's Motion For Extension

Of Time To Respond To Defendants' Second Set Of Interrogatories

And Requests For Production Of Documents (document #85) is

granted. To the extent these Interrogatories and Requests for

Production of Documents relate solely to the Counterclaim, no

response will be required of plaintiff. To the extent they relate

to the issues raised by the Amended Complaint or the Answer,

responses thereto will be deemed timely if made within fourteen

(14) days of the date of this Order.

IT IS FURTHER ORDERED that defendants' Motion For Leave To

File Sur Replies And For Extension Of Time (document #88) is

denied.

IT IS SO ORDERED.

 /s/ Jimm Larry Hendren 

JIMM LARRY HENDREN

UNITED STATES DISTRICT JUDGE

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