Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-01341/USCOURTS-casd-3_18-cv-01341-1/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement (Lanham Act)

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FILED 

FEB,2 6 2020 

CLERK US DISTRICT COURT 

SOUT ERN DISTRICT OF CALIFORNl6 

BY ., 0EPUT, 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

WHOLESALE SPORTS, INC., 

Plaintiff, 

v. 

ANDREW HENLE; LES SPORTS 

TRON; and JEAN H. HENLE, INC., 

Defendants. 

AND RELATED COUNTERCLAIMS. 

Case No.: 18cv1341-LAB(KSC) 

ORDER DENYING PLAINTIFF'S 

REQUESTS TO RE-OPEN FACT 

DISCOVERY AND RE-OPEN THE 

DEADLINE FOR AMENDING THE 

PLEADINGS 

[Doc. No. 35.] 

Before the Court is the parties' Joint Opposed Motion Regarding Plaintiffs 

21 Request to Amend the Scheduling Order. [Doc. No. 35.] In the Joint Motion, plaintiff 

22 seeks an order re-opening fact discovery and re-opening the time for amending the 

23 pleadings. Plaintiffs reason for the request is discovery of"new evidence" believed to 

24 necessitate depositions of percipient witnesses and amendments to the Complaint. [Doc. 

25 No. 35, at p. 2.] Defendants vigorously oppose plaintiffs requests to re-open fact 

26 discovery and extend the time for amending the Complaint. [Doc. No.JS, at pp. 4-6; 16-

27 26.] The Joint Motion is 26 pages in length and was submitted with three declarations 

28 and several exhibits totaling 65 pages. 

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1 Background 

2 Plaintiff is in the business of manufacturing and distributing sporting equipment in 

3 the United States, such as hockey sticks, helmets, jerseys, and socks. [Doc. No. 1, at 

4 p. 3.] These sporting goods and equipment are sold under the brand "Tron" or "TronX" 

5 (the "Tron brands"). [Doc. No. 1, at pp. 3-4.] Plaintiff"conducts a substantial portion of 

6 its sales through the internet, and primarily through two websites: hockeytron.com and 

7 hockeywestcom. [Doc. No. 1, at p. 3.] 

8 On September 15, 2014, the parties entered into a written distribution agreement 

9 entitled the "Hockey Tron Agreement." [Doc. No. 1, at p. 4; Doc. No. 5, at p. 4.] Under 

10 the agreement, defendant was granted the exclusive right to import Tron and TronX 

11 brand sporting equipment and other products and distribute them, in Canada. [Doc. No. 1, 

12 at p, 4.] The agreement allowed defendant to operate independently in Canada under the 

13 name "Tron Canada." [Doc. No. 1, at p. 4.] In addition, the agreement provided for 

14 defendants to pay plaintiff"a fee based on a percentage of the costs of the goods it 

15 imported pursuant to the Hockey Tron Agreement." [Doc. No. 1, at p. 5.] Using 

16 plaintiffs business management software, defendants were responsible under the 

17 agreement "for setting up and operating hockeytron.com and tronsports.com websites to 

18 conduct retail and wholesale business in Canada." [Doc. No. 1, at p. 5.] 

19 Defendants consistently placed orders from 2014 through 2016. To fulfill 

20 defendants' orders, plaintiff obtained specific goods from its manufacturers. Defendants 

21 also ordered products directly from manufacturers approved by plaintiff. [Doc. No. 1, at 

22 p. 5.] Initially, sales of Tron products expanded in Canada. [Doc. No. 1, at p. 6.] 

23 Problems with the parties' business relationship began to occur in 2016. J.>laintiff 

24 threatened not to continue filling orders "based on [defendants'] non-payment of fees" 

25 and later concluded defendants had "no intention of paying outstanding fees" or fees 

26 incurred for any additional orders. [Doc. No. 1, at p. 6.] The Complaint further alleges 

27 that defendants were hiding sales of Tron products to avoid paying the contracted fee; 

28 selling goods under the brand "Troy" through a separate website; and "affixing the Tron 

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1 Brands to equipment not approved by [plaintiff] and of an inferior quality .... " [Doc. 

2 No. 1, at pp. 6-7.] In addition, the Complaint alleges defendants began "engaging in 

3 conduct that undermined the benefits [plaintiff] expected to receive under the Hockey 

4 Tron Agreement," such as damaging plaintiffs business relationships with its vendors. 

5 [Doc. No. 1, at pp. 6-7.] The Complaint alleges defendants' "fraudulent conduct ... was 

6 intended to further their efforts to misappropriate [plaintiffs] goodwill." [Doc. No. 1, at 

7. p. 7.] 

8 Defendants also filed a Counter-Complaint alleging that plaintiff breached the 

9 Hockey Tron Agreement "by intentionally and repeatedly selling products in Canada in 

10 contravention of the exclusivity provision," which created confusion in the Canadian 

11 marketplace and caused defendants to lose sales. [Doc. No. 5, at pp. 4-5.] The Counter12 Complaint also alleges plaintiff breached the Hockey Tron Agreement by shipping 

13 inferior goods to them that did not meet product specifications and could not be sold. 

14 [Doc. No. 5, at p. 5.] In addition, the Counter-Complaint alleges plaintiff failed to 

15 provide adequate support and assistance with the software defendants were required to 

16 use under the Hockey Tron Agreement, and this caused monetary damages and 

17 "tremendous aggravation." [Doc. No. 5, at p. 6.] Finally, the Counter-Complaint alleges 

18 defendants discovered during the evolving business relationship that plaintiff failed to 

19 provide "truthful and accurate costing information, which inevitably led to lower than 

20 anticipated profits." [Doc. No. 5, at p. 7.] 

21 Discussion 

22 A party seeking to modify a scheduling order must show "good cause." Fed. R. 

23 Civ. P. 16(b)(4). "Rule 16(b)'s 'good cause' standard primarily considers the diligence 

24 of the party seeking the amendment [ of a scheduling order]. The district court may 

25 modify the pretrial schedule 'ifit cannot reasonably be met despite the diligence of the 

26 party seeking the extension.' Fed.R.Civ.P. 16 advisory committee's notes (1983 

27 amendment)." Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 

28 1992). To justify re-opening discovery, the moving party must show it "diligently 

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1 pursued its previous discovery opportunities .... " Panatronic USA v. AT&T Corp., 287 

2 F.3d 840, 846 (9th Cir. 2002). A request to re-open discovery may be denied if the 

3 parties already "had ample opportunity to conduct discovery." Id. 

4 Once a Rule 16 scheduling order is entered setting a deadline for amending the 

5 pleadings, a party seeking to amend a pleading after the deadline must first satisfy 

6 Rule 16's "good cause" standard. AmerisourceBergen Corp. v. Dialysist West, Inc., 465 

7 F.3d 946, 953 (9th Cir. 2006). "Unlike Rule 15(a)'s liberal amendment policy which 

8 focuses on the bad faith of the party seeking to interpose an amendment and the prejudice 

9 to the opposing party, Rule 16(b)'s 'good cause' standard primarily considers the 

10 diligence of the party seeking the amendment." Johnson v. Mammoth, 975 F.2d at 609. 

11 In other words, a party seeking leave to amend a pleading filed after the entry of a 

12 Rule 16 scheduling order cannot "appeal to the liberal amendment procedures afforded 

13 by Rule 15; [the party's] tardy motion [must] satisfy the more stringent 'good cause' 

14 showing required under Rule 16." AmerisourceBergen Corp. v. Dialysist W., Inc., 465 

15 F.3d 946, 952 (9th Cir. 2006). 

16 In sum, for this Court to grant plaintiffs request to modify the Amended 

1 7 Scheduling Order, plaintiff must first establish "good cause" to re-open discovery and 

18 "good cause" to re-open the deadline for amending the pleadings. If "good cause" to re19 open the deadline for amending the pleadings is established, it would then be necessary 

20 for plaintiff to file a Rule 15 motion to amend the Complaint, and that motion to amend 

21 would be considered by Judge Bums, as the District Judge assigned to the case, unless 

22 the motion is referred to the undersigned Magistrate Judge. See 28 U.S.C. 636(a)&(b). 

23 As noted above, plaintiffs reason for seeking to re-open fact discovery and the 

24 deadline for amending the Complaint is that "new evidence has recently come to light." 

25 [Doc. No. 35, at p. 2.] Plaintiff submitted the Declaration of its chief executive officer in 

26 support of its contention that its discovery of "new evidence" establishes good cause to 

27 re-open discovery and re-open the time for amending the pleadings. [Doc. No. 35-2.] 

28 The Declaration first explains that the "new evidence" consists of"an e-mail string" 

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1 received by plaintiff on November 28, 2019 from one of its sales representatives, a copy 

2 of which is attached as Exhibit 1 to the Declaration. Plaintiff believes the e-mail string 

3 "shows unequivocally" that defendants are breaching the Hockey Tron Agreement "by 

4 directly soliciting not only [plaintiffs] existing customers in the United States but doing 

5 so through [plaintiffs] independent sales representatives." [Doc. No. 35-2, at p. 2.] 

6 Plaintiff believes this e-mail evidence shows defendants have been using plaintiffs 

7 distribution lines in the United States and Canada to divert orders for plaintiffs Tron 

8 products to its own line of competing Troy products. [Doc. No. 35, at pp. 8-9.] 

9 However, without more, the Court notes based on a review of Exhibit 1 that the e-mails 

.10 do not clearly and unequivocally support plaintiffs contentions. 

11 The Declaration further explains that on December 19, 2019 plaintiff began 

12 tracking additional e-mails of its employee, Pat Lovett, because of "a material drop in 

13 sales in the fall of2019." [Doc. No. 35-2, at p. 2.] According to the Declaration, 

14 Mr. Lovett's e-mails, examples of which are attached as Exhibits 2, 3 and 4, prove he 

15 "was part of a conspiracy with defendants to defraud [plaintiff] and direct orders from 

16 [plaintiffs] customers in the United States and Canada to 'Troy' in order to avoid 

17 payment of royalties." [Doc. No. 35-2, at p. 2.] Plaintiff terminated Mr. Lovett's 

18 employment on December 24, 2019. [Doc. No. 35-2, at p. 2.] 

19 Next, the Declaration states that plaintiff has obtained evidence indicating 

20 defendants are using the Tron website "to entice unknowing customers who wish to 

21 purchase Tron products but substituting 'Troy' products when fulfilling the orders." 

22 [Doc. No. 35-2, at p. 2.] According to the Declaration, plaintiffs representatives 

23 "ordered Tron products from California through defendant's Tron website, 

24 'besthockey.ca.' Defendant[ s] not only shipped to California, but fraudulently 

25 substituted 'Troy' products for the Tron products ordered." [Doc. No. 35-2, at p. 2.] 

26 Plaintiff believes this evidence shows defendants substituted Troy products for Tron 

27 products to "defraud" plaintiff"out of royalties" and mislead customers. In addition, 

28 plaintiff believes this evidence shows a breach of the covenant of good faith and fair 

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1 dealing.· [Doc. No. 35, at pp. 8-9.] The Court notes that the Declaration does not reveal 

2 when the alleged order by plaintiffs representatives was placed or when the alleged 

3 substitution took place. 

4 Finally, the Declaration of plaintiffs chief executive officer states as follows: 

5 "While [plaintiff] had suspected defendant was attempting to solicit our United States 

6 customers to break into the United States market and directly compete with Tron, [the 

7 subject e-mails were] the first time we had direct evidence of that fact." [Doc. No. 35-2, 

8 atp. 2.] 

9 In opposition, defendants submitted convincing evidence in a Declaration by lead 

10 counsel with attached exhibits, which indicate that plaintiffs purported "new evidence" 

11 is "nothing new," was not "just discovered" recently, and/or would have been known to 

12 plaintiff during the normal discovery period ifthey completed key discovery and 

13 reviewed defendants' discovery responses. [Doc. No. 35, at pp. 18-23.] Defendants 

14 believe plaintiff"is trying to hustle a second chance at discovery." 1 [Doc. No. 35, at 

15 p. 22.] 

16 First, defendants represent they disclosed prior to the close of discovery that they 

17 were selling Troy products in the United States. [Doc. No. 35, at pp. 4, 18.] In support 

18 of this argument, the Declaration by defendants' lead counsel represents that defendants 

19 produced copies of a customer list and a detailed sales report on May 17, 2019 disclosing 

20 that defendants were selling Troy products in the United States. Redacted versions of the 

21 customer list and sales report are attached as Exhibit D to counsel's Declaration. [Doc. 

22 No. 35, at p. 17-18; Doc. No. 35-3, at pp. 3-4, citing Ex. D, at Doc. No. 35-3, at pp. 16-

23 17.] 

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26 I In other arguments, defendants challenge the viability of the allegations and 

amendments plaintiff seeks to add to the Complaint. Although these issues might be 

relevant to a Rule 15 motion to amend the Complaint, they are umelated to the issue of 

diligence and will not be addressed herein. 

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1 Second, defendants contend the e-mails submitted by plaintiff from Mr. Lovett 

2 "about filling orders for plaintiffs Tron products with defendants' Troy products ... do 

3 not show" what plaintiff contends. [Doc. No. 35, at pp. 4-5, 18.] More importantly, 

4 however, defendants point out that Mr. Lovett used plaintiffs e-mail domain 

5 (pat@wholesalesportsinc.com), and the witnesses named in defendants' initial 

6 disclosures listed Mr. Lovett as a sales representative for both plaintiff and defendants. A 

7 redacted version of defendant~' initial disclosures listing Mr. Lovett as a sales 

8 representative for both plaintiff and defendants (i.e., "VP Sales at WSI and VP Sales 

9 Troy Apparel, Inc.") is attached to the Declaration of defendants' lead counsel. [Doc. 

10 No. 35, at p. 5; Doc. No. 35-3, at pp. 4, 23.] Therefore, defendants contend plaintiff 

11 "clearly knew Mr. Lovett worked and made sales for both plaintiff and defendants from 

12 at least the outset of discovery, but they never took his deposition. They never took any 

13 depositions during discovery." [Doc. No. 35, at p. 5.] Alternatively, if these are "new 

14 revelations" to plaintiff, defendants contend it is because of plaintiffs "failure to review 

15 discovery responses" and/or to investigate its "suspicions" earlier, apparently failing to 

16 discover relevant information about its own employee "right under its nose-the whole 

17 time." [Doc.No.35,atpp.21-22.] 

18 Third, in response to plaintiffs contention that its representatives ordered Tron 

19 products from California through defendants' Tron website, "besthockey.ca," but in· 

20 filling the order defendants substituted Troy products in place of Tron products, 

21 defendants point out that plaintiff did not state when this alleged substitution took place. 

22 [Doc. No. 35, at p. 19.] Defendants not only deny this occurred, they assert this "could 

23 not be a new alleged discovery." [Doc. No. 35, at p. 19.] The Declaration of defendants' 

24 lead counsel indicates plaintiff was aware as of May 2019 that the besthockey.ca website 

25 "was taken down." [Doc. No. 35-3, at p. 4.] Attached as Exhibit F to defense counsel's 

26 Declaration is a copy of a letter from plaintiffs counsel dated May 30, 2019, which states 

27 in part as follows: "It has come to our attention that the website, www.besthockey.ca, 

28 which [defendants] control, has recently been taken down." [Doc. No. 35-3, at p. 26.] 

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1 This letter also reminds defendants of their obligation to preserve evidence and 

2 specifically alleges defendants used the website to sell Tron goods and then "filled orders 

3 placed through that website using Troy goods." [Doc. No. 35-3, at p. 27.] 

4 Fourth, the Declaration of defendant's le.ad counsel further states that plaintiff 

5 "made minimal efforts during the normal discovery period." [Doc. No. 35-3, at p. 2.] As 

6 examples, counsel's Declaration states that plaintiff did not follow up on discovery 

7 responses, did not take any depositions, and failed to provide witnesses in response to 

8 defendants' deposition notices. [Doc. No. 35-3, at p. 3.] Based on correspondence 

9 between counsel that is attached to the Declaration of defendants' lead counsel, it appears 

10 both parties essentially agreed to delay discovery with the hope of settling the case. [ See, 

11 e.g., Doc. No. 35-3, at p. 12 (stating "we'll agree to postpone the deposition provided 

12 you'll agree to present the WSI 30b6 witness(es) in the near term after discovery closes 

13 (ifwe don't settle soon)").] In this regard, the Court notes that the representations of 

14 defendants' lead counsel are consistent with plaintiff's statement that "the parties 

15 exchanged written discovery, but no depositions [were] taken" prior to the deadline for 

16 completing fact discovery. [Doc. No. 35, at p. 8.] 

17 Based on its alleged discovery of"new evidence," plaintiff's new counsel wants to 

18 take the depositions of percipient witnesses [Doc. No. 35, at p. 2; Doc. No. 35-1, at pp. 1-

19 2] and add two causes of action to the Complaint. [Doc. No. 35, at p. 12.] To complete 

· 20 depositions, plaintiff wants the Court to re-open discovery from now until May 22, 2020 

21 (i.e., for about three months). [Doc. No. 35, at pp. 2-3.] This case has been pending for 

22 more than a year and a half since the Complaint was filed, on June 20, 2018. [Doc. No. 

23 l.] The deadline for filing motions to amend the pleadings was February 25, 2019 (i.e., a 

24 year ago). [Doc. No. 20, at p. l.] On June 27, 2019, the Court issued an Amended 

25 Scheduling Order extending the fact discovery and other deadlines, because defendant 

26 Henle was recovering from surgery. [Doc. Nos. 20, 23-2, 24.] The amended deadline for 

27 completing fact discovery was November 1, 2019 (i.e., about two months ago). [Doc. 

28 No. 24, at p. 1.] Even taking into consideration the three months necessary for defendant 

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1 Henle to recover from surgery, the parties had approximately seven (7) months to 

2 complete fact discovery in a case that does not involve a complex set of disputed facts. 

3 [Doc. Nos. 20, 23-2, 24.] The amended deadline for completing expert discovery is 

4 March 20, 2020. [Doc. No. 24, at p. 3.] 

5 Plaintiff states in the Joint Motion that it does not want to re-open or extend the 

6 deadline for completing expert discovery or continue the final Pretrial Conference, which 

7 is scheduled for August 24, 2020. [Doc. No. 35, at p. 2; Doc. No. 24, at p. 4.] However, 

8 if the Court re-opens discovery for three months until May 22, 2020, as plaintiff requests, 

9 it would be necessary to extend all other dates and deadlines in the Amended Scheduling 

10 Order, including the final Pre-Trial Conference, to avoid prejudice to defendants. In this 

11 regard, the Court notes that potential prejudice to an opposing party "might supply 

12 additional reasons" to deny a motion seeking modification of a scheduling order even 

13 though the focus of the inquiry is the moving party's diligence and reasons for seeking 

14 modification. Johnson v. Mammoth, 975 F.2d at 609. 

15 Defendants contend re-opening discovery without extending other deadlines, such 

16 as the deadlines for designating experts, completing expert discovery, and filing 

17 dispositive motions, would give plaintiff an unfair advantage. [Doc. No. 35, at p. 22.] 

18 For example, if plaintiff conducts additional discovery and amends the complaint, 

19 defendants have indicated they would like the opportunity to complete additional 

20 discovery and would also consider designating experts and filing a potentially dispositive 

21 motion. [Doc. No. 35, at p. 22-23.] Defendants specifically argue that if the Court re22 opens discovery, they should be able to complete their "timely noticed 30(b)(6) 

23 deposition of plaintiff," which plaintiff delayed "under the guise of settlement progress 

24 which went nowhere." [Doc. No. 35, at p. 23.] In other words, defendants contend 

25 plaintiffs request to modify the current Amended Scheduling Order will result in 

26 significant delays in bringing the case to trial. 

27 Under the circumstances presented, it is this Court's view that plaintiff has not 

28 established good cause for re-opening fact discovery and re-opening the deadline for 

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1 amending the pleadings. Without more, a lack of diligence is demonstrated in the record 

2 before the Court. Plaintiff has not addressed defendants' arguments or evidence 

3 indicating that it "made minimal efforts during the normal discovery period." [Doc. No. 

4 35-3, at p. 2.] Nor has plaintiff addressed defendants' arguments of evidence indicating 

5 plaintiff knew or should have known of the "new evidence" well before the expiration of 

6 the Novemb_er 1, 2019 discovery deadline, and if it did not, it was because it was not 

7 diligent in reviewing discovery responses or in completing key discovery, such as 

8 depositions, prior to the deadline. [Doc. No. 35, at pp. 18-20, 22-23.] 

9 Conclusion 

10 Based on the foregoing, plaintiff's requests to re-open the time for completing fact 

11 discovery and to re-open the deadline for amending the pleadings are DENlED for failure 

12 to establish good cause. 

13 IT IS SO ORDERED. 

14 Dated: February lj_, 2020 

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