Case Name: HEARTLAND BANK, Plaintiff-Appellant, v. HEARTLAND HOME FINANCE, INC., Defendant-Appellee
Court: United States Court of Appeals for the Eighth Circuit
Jurisdiction: United States
Decision Date: 2003-07-17
Citations: 335 F.3d 810
Docket Number: No. 02-2468
Parties: HEARTLAND BANK, Plaintiff-Appellant, v. HEARTLAND HOME FINANCE, INC., Defendant-Appellee.
Judges: Before HANSEN, Chief Judge, BRIGHT, and SMITH, Circuit Judges.
Reporter: Federal Reporter 3d Series
Volume: 335
Pages: 810–822

Head Matter:
HEARTLAND BANK, Plaintiff-Appellant, v. HEARTLAND HOME FINANCE, INC., Defendant-Appellee.
No. 02-2468.
United States Court of Appeals, Eighth Circuit.
Submitted: Jan. 16, 2003.
Filed: July 17, 2003.
Thomas C. Walsh, argued, St. Louis, MO (K. Lee Marshall, St. Louis, MO, on the brief), for appellant.
Thomas R. Dee, argued, Chicago, IL (Chad A. Schiefelbein, Chicago, IL, Jordan B. Cherrick, Jeffrey R. Fink, St. Louis, MO, on the brief), for appellee.
Before HANSEN, Chief Judge, BRIGHT, and SMITH, Circuit Judges.
The Honorable David R. Hansen stepped down as Chief Judge of the United States Court of Appeals for the Eighth Circuit at the close of business on March 31, 2003. He has been succeeded by the Honorable James B. Loken.

Opinion:
BRIGHT, Circuit Judge.
Heartland Bank ("Bank") brought a five-count complaint against Heartland Home Finance, Inc. ("HHF") alleging unfair competition under the Lanham Act, common law trade name and service mark infringement, service mark infringement and mark dilution under Missouri state law, and common law unfair competition. The district court granted several of HHF's motions to exclude certain evidence and testimony. At the conclusion of the Bank's case, the district court granted HHF's motion for judgment as a matter of law because the Bank failed to adduce sufficient evidence of secondary meaning and likelihood of confusion.
The Bank appealed the judgment of the district court. We vacate the judgment and remand for further proceedings and possible alternative sanctions consistent with this opinion.
I. BACKGROUND
The Bank was founded in 1887 under the name Economy Federal. It adopted the name Heartland Bank in 1987. Since that time it has used the name continuously for banking services, including consumer deposits, business loans, checking accounts, and originating and refinancing single family mortgages. In 1994, the Bank registered its Heartland mark with the state of Missouri. In the same year, the Bank began using the mark, "Heartland Mortgage," and registered that mark with the state in 1998. Both marks are used in conjunction with the Bank's characteristic wheat emblem.
HHF is an Illinois corporation in the mortgage lending service business. HHF has used the word Heartland in its name since its formation in 1987. Initially, HHF operated in Illinois and Ohio. Today HHF does business in twenty-five states and almost exclusively telemarkets its services. In February 1998, HHF established an office in Missouri and began offering mortgage financing services in St. Louis under its name, Heartland Home Finance. HHF asserts that it has never used the name Heartland Mortgage Company in Missouri, but it uses that name in Illinois. HHF's mark also features a wheat emblem.
According to the Bank, it initiated this action after receiving a series of phone calls from individuals complaining to the Bank about HHF's rude telemarketing and other conduct. The Bank does not engage in telemarketing.
At the inception of this dispute, the Bank's outside counsel recognized that evidence of consumer confusion would be advantageous in the litigation. First, the Bank hired Henry D. Ostberg to conduct a survey to determine the likelihood of confusion between the Bank and HHF. The trial court eventually excluded this evidence at trial because the Bank failed to make a timely disclosure of their expert reports pursuant to the court's case management order. Second, the outside coun sel drafted a form entitled, "Name Confusion Incident Log," and instructed Bank personnel to complete the form for each call or inquiry where the person believes that the Bank and HHF are related or the person is otherwise confused by the similarity of the entities' names.
Bank counsel obtained the results of this form from Bank personnel. During discovery, the Bank responded to HHF's request that the Bank state all alleged instances of confusion by asserting attorney-client and .work product privileges to protect the logs from discovery. Instead of providing the actual forms, affidavits, and other items that documented the instances of confusion, the Bank created summaries and presented those to HHF in documents called, Incidents of Actual Confusion and Supplemental Incidents of Actual Confusion (collectively "Confusion Log Summaries").
The parties scheduled depositions to occur before the discovery deadline of October 31, 2000. But before the depositions began, the parties' representatives tentatively agreed to resolve the case through settlement, and the depositions were can-celled. From October through early December, the parties exchanged draft settlement memoranda.
On April 18, 2001, just three days before the trial date of April 16, 2001, the Bank unilaterally informed the district court that the parties were finalizing settlement and asked that the trial date be stricken. The court entered an order canceling the trial date and ordering the Bank to provide it with settlement papers by May 13, 2001, or face dismissal. On May 11, 2001, the Bank moved the district court to enforce the settlement agreement. The district court denied this motion on January 11, 2002, and set a trial date of March 25, 2002.
On February 20, 2002, the Bank moved to reopen discovery. The court denied this motion and refused to extend discovery. The court noted that discovery certainly was foreclosed by April 13, 2001, when the Bank asked the court to vacate the impending trial date, and did not request an extension of discovery at that point.
On March 5, 2002, twenty days prior to the trial date, the Bank turned over its trial exhibits to HHF. This pretrial disclosure included the Name Confusion Incident Log forms, witness statements, affidavits, and other documents that the Bank had not previously disclosed, but which formed the basis of its Confusion Log Summaries. When HHF received this evidence, it compared the underlying documents with the Confusion Log Summaries and arrived at the conclusion that the Bank had misled HHF and committed fraud on the court because the underlying documents did not support Confusion Log Summaries. On this basis, HHF made the following motion which it served on the trial date of March 25, 2002: Defendant's Motion to Bar Plaintiffs Evidence of Alleged Incidents of Actual Confusion, Strike Plaintiffs Pleadings, Enter Judgment Against Plaintiff and Award Defendant Attorneys' Fees and Costs.
In this motion the defendant described the conduct of plaintiff and plaintiffs counsel as "the perpetration of a fraud upon HHF and the Court" which "offend[s] the most basic notions of fair play and justice."
On March 27, 2002, the first day of trial, the court considered HHF's motion to ex- elude the Confusion Log Summaries, the underlying documents, and testimony from any witnesses connected to these items. In each of the summaries, which consisted of twenty-seven entries, the discovery response in essence asserted that the persons contacting the Bank complained of rude treatment from HHF which the recipient of the treatment mistook to be the Bank. However, the actual reports examined by the court revealed that the reporting person, with one exception, stated that the contact or call came from "Heartland Mortgage." The reporting individuals did not use the name "Heartland Home.Finance," nor could each one of the entries necessarily be attributed to HHF.
At the time of the calls, a company not affiliated with either party operated in St. Louis under the name of Heartland Mortgage Centers (spelled without the "e"). Moreover, HHF operates as Heartland Mortgage only in Illinois. ' At no time has plaintiff definitively established that each entry in the Confusion Log Summaries is directly attributable to HHF. At most, that would only be a possibility. Obviously, what happened is that plaintiffs attorneys put their own spin on the log, and the spin has not been substantiated.
The trial court discussed the following incidents with counsel when she considered HHF's motion to exclude:
(1) Item 3 in the summary stated: "Unidentified female caller complained about rude treatment by Heartland Home Finance which she mistook to be the Heartland Bank." In fact, proposed Trial Exhibit 91 disclosed that the caller stated only that she had received a call from Heartland Mortgage.
(2) Item 5, Marge Dodta, the summary and the proposed Trial Exhibit 87 were essentially the same as Item 3 above.
(3) Item 7 in the summary stated: "Ms. Stefan complained about rude treatment by Heartland Home Finance which he (sic) mistook to be Heartland Bank." In fact, proposed Trial Exhibit 89 shows that Ms. Stefan actually complained about "Heartland Mortgage." After the bank employee taking the call informed Ms. Stefan about possible confusion, Ms. Stefan "called back after she found Heartland Mortgage Centers on Lind [illegible] Ave."
(4) Item 4, Eileen Sellers, in the summary stated: "Ms. Sellers complained about rude treatment by Heartland Home Finance which she mistook to be Heartland Bank." The Bank's proposed Trial Exhibit 86 showed that Ms. Sellers received a call from "Heartland Mortgage." Proposed Trial Exhibit 94, a statement taken by the Bank, reveals that Ms. Sellers tried to trace the telemarketing call she received from an individual named "Joe Schnell." After that was unsuccessful, Ms. Sellers and her husband "resorted to the phone book." They looked in the phone book, and saw, "Heartland Mortgage," the mortgage division of the Bank. Upon calling the Bank, a Bank informed Ms. Sellers of the existence of HHF. Ms. Sellers then "looked in the phoné book and contacted Heartland Home Finance." Ms. Sellers spoke to a manager who confirmed that Joe Schnell was an employee.
Item 4 is the only entry in the Confusion Log Summaries where the alleged rude call is shown to have emanated from HHF. However, it is not clear that Ms. Sellers associated that call with the Bank. She called the Bank only in an effort to trace the call. -
In sum, the court examined four of twenty-seven items, and three clearly served to mislead HHF. The trial court ruled that the Bank should have produced the underlying documents "at least as early as January" 2002, when the motion to enforce settlement was denied, and the Bank's nondisclosure of the documents until twenty days before trial was inexcusable. Additionally, the court found that the Bank's Confusion Log Summaries were "clearly misleading" because many of the log forms did not reflect that the caller actually said "Heartland Home Finance." The Confusion Log Summaries were based on the Bank's assumption about why people were confused "rather than accurately reflecting what the documents say and what the callers actually said." Rejecting HHF's request that judgment be entered against the Bank, the court instead excluded the actual logs as evidence at trial and precluded the Bank from offering the testimony of nine third-party witnesses and two Bank employees.
During the discussion before the court, the district court judge made the following comments and rulings. The court asked about prejudice and counsel for HHF replied:
MR. DEE: They have the wrong company, Your Honor. They're suing the wrong parties here. We have gone through two-and-a-half years and spent too much of my client's money fighting a case that is against the wrong company.
They knew it was against the wrong company. They hid the facts that it was against the wrong company. They can't get around the fact that when the caller said, "Heartland Mortgage," they told us — the caller said, "Heartland Home Finance."
If they had told us that the caller said, "Heartland Mortgage," the case would be completely different. This entire case is based upon the fact they claim that all these callers said, "Heartland Home Finance," and they said, "Heartland Mortgage."
(Tr. at 27).
The court viewed counsel's action in discovery as highly improper, stating, "[T]he purpose of this summary is not to reflect what your logic is but to reflect what the documents say and to do so accurately." (Tr. at 30). The court added:
Now, they did receive these summaries which were clearly inaccurate and represented essentially the plaintiffs assumption about what people were saying, rather than accurately reflecting what the documents say and what the callers actually said. That's misleading.
And because they don't accurately reflect what was said by these callers, they don't even accurately reflect what was reported by your employees who took these calls. And they're misleading. Clearly misleading.
(Tr. at 85-36).
The court made an oral determination on the sanctions issue stating:
Now, I think that the defendant is correct that some sanction is appropriate in this case. I don't believe that a sanction in the form of a judgment is the appropriate remedy, because there are lesser remedies that I think will address the issue and address the plaintiffs misconduct short of depriving the plaintiff of any opportunity to pursue relief in the case.
I don't know whether either of you has anything further to say on the issue of sanctions. But, clearly, I will grant the defendant leave to submit a verified statement of the attorney's fees that it has incurred in connection with presenting this motion to the Court; and I will make a determination about a reasonable award of attorney's fees and costs to be assessed to the defendant and against the plaintiff in this case.
As far as these documents are concerned, the documents that appear under Tab H and any testimony relating to the portion contained in those documents, I am not going to let you present that. So if you have witnesses who you were going to call to talk about these reports of actual confusion that are reflected in Exhibit H, I am not going to permit you to present that testimony, nor will you be permitted to present any evidence on that issue.
(Tr. at 36-37).
Thereafter, the case proceeded to trial before a jury. The Bank's case took four hours; it called five witnesses and offered eleven exhibits into evidence. One of the Bank's witnesses, Bryan Morak, a former HHF employee, was not allowed to testify that he believed he had been working for the Bank when he was working for HHF. The trial court prohibited this line of testimony because the Bank failed to notify HHF of Morak's potential testimony in advance of the trial.
At the close of the Bank's case, the trial court granted HHF's motion for judgment as a matter of law based on the Bank's failure to establish secondary meaning in its marks or a likelihood of confusion. On secondary meaning, the court held that the Bank had established: (1) it had used the name "Heartland" continuously since 1987; (2) it had made considerable efforts to advertise its name and generate good will in the community; (3) it had expanded its operations throughout the St. Louis metropolitan area since 1987. However, the Bank failed to prove that "its mark has become associated in the mind of the public as identifying the source of goods or services." The district court acknowledged that there are "a number of ways that [secondary meaning] can be proved" but the Bank adduced no evidence of any "association customers make between the mark and the bank." In regard to proving actual confusion, the district court concluded that the Bank's only evidence of confusion was that Bryan Morak's mother mistakenly believed that her son was employed by the Bank when in fact he was employed by HHF. The court determined that it was clear Mrs. Morak was confused, but there was no evidence about what precisely prompted her confusion. Ultimately, the court stated, "So I guess that the bottom line is that this lack of any evidence on the issue of secondary meaning is, in my view, fatal to the plaintiffs case."
The Bank's motion for reconsideration was denied and the district court entered judgment for HHF on March 28, 2002. This appeal followed.
II. DISCUSSION
A. Exclusion of Actual Confusion Evidence and Testimony
We review sanctions imposed under either Rule 37 of the Federal Rules of Civil Procedure or the inherent power of the district court for abuse of discretion. Martin v. DaimlerChrysler Corp., 251 F.3d 691, 694 (8th Cir.2001). We have characterized this review as "very deferential" and stressed that we "will not interfere with the great latitude exercised by the district court in discovery matters." Sylla-Sawdon v. Uniroyal Goodrich Tire Co., 47 F.3d 277, 280 (8th Cir.1995). Our duty is to scrutinize not just the conclusion reached by the district court, but "to examine with care and respect the process that led up to it." Bonds v. District of Columbia, 93 F.3d 801, 804 (D.C.Cir.1996) (quoting Founding Church of Scientology v. Webster, 802 F.2d 1448, 1457 (D.C.Cir.1986)).
In arriving at its sanctions decision, the district court explained the nature of the Bank's misconduct: (1) "these documents were not timely disclosed"; and (2) "the information summarizing these documents was misleading at the time that it was presented to the defendant." (Tr. at 38). We will examine both of these grounds- for exclusion in turn.
i. Untimely Disclosure
The Bank repeatedly tries to shift the blame for its nondisclosure by arguing that HHF never requested the underlying documents. However, in July 2000, during discovery, HHF requested "[a]ll documents and things evidencing or reflecting any actual confusion, deception, or mistake arising out of the use of any mark by any party." In its Reply Brief, the Bank clarifies its argument to indicate that HHF should have asked for the underlying documents again after the trial court denied the motion to enforce settlement. The district court appropriately rejected this line of reasoning. The Bank was under a continuing obligation to disclose its evidence once HHF initially requested it.
Similarly, we reject the Bank's contentions that once settlement discussions started and the depositions were cancelled, it was under no obligation to disclose, and that the documents underlying its Confusion Log Summaries were privileged. The Bank had withdrawn any claims of privilege by October 2000, and the Bank's continuing obligation required that it produce any nonprivileged documents it possessed if it wanted to introduce them at trial.
The district court did not err in determining that the Bank's untimely disclosure entitled HHF to some type of remedy in the form of a sanction. We examine the extent of the court's imposed sanction below.
ii. Misleading Disclosure
The district court's second ground for excluding the Bank's Confusion Log Summaries evidence and testimony was that the Bank's initial disclosure to HHF in the form of the Confusion Log Summaries had been misleading. The court offered its reasoning on the second prong as, "these summaries which were clearly inaccurate and represented essentially the plaintiffs assumption about what people were saying, rather than accurately reflecting what the documents say and what the callers actually said. That's misleading." (Tr. at 35). Moreover, as we have observed, the district court correctly explained, "[T]he purpose of this summary is not to reflect what your logic is but to reflect what the documents say and to do so accurately." (Tr. at 30).
In its briefs to this court, the Bank attempts to defend its Confusion Log Summaries by characterizing them as "perfectly proper interpretive advocacy" and the result of a "logical deduction." Although it never explicitly makes this argument or offers any case law in support, the Bank also seems to contend that its Confusion Log Summaries are not misleading because they are only allegations of confusion. We fail to understand how a misleading allegation of an instance of actual confusion differs from a misleading actual instance of confusion, or why it would be proper for the Bank to mislead HHF in regard to allegations. These arguments are frivolous and unworthy of advocacy.
We do not have the luxury of a written order in this case and so we cannot be certain about the extent of the district court's examination of the Bank's Confusion Log disclosure. A review of the record reveals the materials the district court had before it while ruling on the sanctions motion: HHF's motion with an attached chart comparing the Confusion Log Summaries with the underlying original documents the Bank sought to have admitted into evidence as trial exhibits; the Confusion Log Summaries; and all the underlying original documents. However, the trial transcript indicates that the court explicitly discussed only four of the twenty-seven entries with the parties and three were clearly misleading. Naturally, the transcript does not reveal whether the court considered the comparison chart prior to trial or at some other point prior to ruling.
Based on this record, we cannot be certain that the district court considered each recorded instance of confusion individually and assessed whether or not it was misleading. It appears that the court judged the Confusion Log Summaries in their entirety and excluded witnesses and evidence based on a somewhat limited review.
Moreover, the actual prejudice for the trial may be in question. Defendant's principal complaint seems to be that it has spent more than two years in litigation without having the true facts underlying the plaintiffs complaint, and now having the true facts, the complaint is unfounded. The waste of litigation time can be compensated by appropriate monetary sanctions. Whether the so-called contacts to various persons came from HHF remains an open question. It may well be that plaintiff cannot show any confusion with the twenty-seven items contained in its disclosures. In that circumstance its action will fail, but it is entitled to trial on the merits.
iii. Appropriateness of Sanctions Imposed
We are loath to reverse a district court's sanction in the face of such clearly obstructionist conduct on the part of plaintiff and its attorneys. Nonetheless, the record does not substantiate the breadth of the sanction imposed by the district court.
The court did consider some alternative sanctions: "I don't believe that a sanction in the form of a judgment is the appropriate remedy, because there are lesser remedies that I think will address the issue and address the plaintiffs misconduct short of depriving the plaintiff of any opportunity to pursue relief in this case." (Tr. at 36). However, the district court's decision to exclude the Bank's nine third-party witnesses and two Bank employees from testifying was tantamount to a dismissal of its claims. Without the excluded evidence, the Bank could not show any case on confusion. The district court should have considered the possibility of lesser sanctions, perhaps excluding only certain items of evidence from the Confusion Log Summaries, granting HHF a continuance, and/or imposing monetary sanctions relating to abuse of discovery upon plaintiffs counsel and upon the plaintiff.
III. CONCLUSION
We remand on the threshold matter of striking all the proposed witness testimony on confusion and remand for reconsideration of all the alleged discovery abuses by plaintiff and counsel, and for consideration of whether the late disclosure prejudiced defendant's ability to defend considering all of the matters disclosed. We need not address any other claims raised by the Bank.
We vacate the judgment and remand for further consideration of the sanctions con sistent with this opinion- and the entry of an appropriate order. No costs are awarded on this appeal.
. The parties vehemently dispute the facts surrounding the settlement process, but those disputes are not material to the issues of this appeal.
. These materials were included with about 250 exhibits.
. I do not join in the separate concurrence of Judge Smith, joined by Judge Hansen. The record on remand may well be different than the record on this appeal. Thus, I believe it is unnecessary at this time to address the matters commented upon in the separate concurrence.