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IN THE UNITED STATES DISTRICT COURT


FOR THE EASTERN DISTRICT OF NORTH CAROLINA


WESTERN DIVISION

No.5:05-CV-478-BO


GEORGIA-PACIFIC CONSUMER
PRODUCTS LP,

Plaintiff,

v.

VON DREHLE CORPORATION,

Defendant.

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ORDER

This matter is before the Court on several motions filed by the parties following jury trial.

For the reasons discussed below, Defendant von Drehle's Motion renewing its request for

Judgment as a Matter of Law [DE 329] is granted. All other pending motions are denied as

moot.

BACKGROUND

This matter has been before the Court in some manner for nearly seven years, and the

Court has entered numerous orders recounting the specific facts and procedural posture of the

case. The Court hereby incorporates by reference the background and facts of this case

enumerated in its order entered March 21, 2011 [DE 238]. Commencing January 4,2012, this

matter proceeded to jury trial at Elizabeth City, North Carolina. The jury returned a verdict in

favor of Plaintiff on January 6,2012, awarding $791,431 in damages [DE 319]. Defendant filed

a timely motion pursuant to Rule 50(b) of the Federal Rules of Civil Procedure, renewing its

request for judgment as a matter of law made at trial.

DISCUSSION

Case 5:05-cv-00478-BO Document 347 Filed 03/28/12 Page 1 of 10

Rule 50(b) provides that if a court does not grant a motion for judgment as a matter of

law made at trial, the court is "considered to have submitted the action to the jury subject to the

court's later deciding the legal questions raised by the motion." F.R.Civ.P.50(b). Judgment as a

matter of law is appropriately entered when "a reasonable jury would not have a legally sufficient

evidentiary basis to find for [a] party on [an] issue." F.R.Civ.P. 50(a)(l); see also Int'l Ground

Transp., Inc. v. Mayor & City Council ofOcean City, 475 F.3d 214,218 (4th Cir. 2007). A court

applies the same standard when deciding a Rule 50(b) motion for judgment as a matter of law as

it would when deciding a Rule 56 motion for summary judgment. Dennis v. Columbia Colleton

Medical Ctr., Inc., 290 F.3d 639, 644 (4th Cir. 2002). That is, a court must decide whether a

jury, when viewing the evidence in the light most favorable to the nonmoving party and drawing

all reasonable inferences in its favor, could have reached the conclusion that was reached by this

jury. Id at 645.

At the heart of Defendant's motion is its contention that Plaintiff has brought several

lawsuits in different United States District Courts against various defendants, at least some of

whom are distributors of Defendant, alleging trademark infringement with regard to Plaintiffs

enMotion paper towel dispensers. Defendant contends that each of these lawsuits involves the

same activity at issue in the instant matter - namely, the "stuffing" of Plaintiffs enMotion

dispensers with paper towels made by paper towel manufacturers other than Plaintiff. The

question submitted to the jury in this case was whether "plaintiff established by a preponderance

of the evidence that the defendant infringed on plaintiffs valid trademark" [DE 319]. The jury

responded to this question in the affirmative. However, because another court had previously

decided this same question in the negative, this Court now holds that Defendant should be

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permitted to raise the affirmative defenses of claim and issue preclusion and that judgment as a

matter of law is appropriate.

Arkansas and Ohio Cases

Prior to the commencement of trial, Defendant filed a second motion to amend its answer

to include preclusion defenses and a renewed motion for summary judgment [DE 275 & 285].

The Court had earlier denied a similar request by Defendant that was based on a decision in the

Western District of Arkansas. The Court's denial of Defendant's request was not on the merits

ofthe underlying preclusion defense, but rather was due to Defendant's sixteen month delay in

raising the issue of a preclusion defense and the potential for prejudice [DE 238]. The basis for

Defendant's second motion to amend, however, is a decision from the Northern District of Ohio,

entered just four days before Defendant moved again in this Court to amend its answer.

In a case involving Plaintiff and a distributor of Defendant, the Northern District of Ohio

court held that Plaintiff had "fully and fairly litigated its claim in the Arkansas litigation that

'stuffing' its dispensers with competitors' replacement rolls violated its trademark and related

and other claims" and that dismissal on the basis of issue preclusion was justified. Georgia-

Pacific Consumer Prods. LP v. Four-U Packaging, Inc.,

F.Supp.2d_, 2011 WL 5252626

(N.D.Ohio, November 4, 2011). The Northern District of Ohio decision is based on the Eighth

Circuit's opinion affirming a Western District of Arkansas judgment that there is no likelihood of

confusion, and therefore no trademark infringement, when Plaintiff s enMotion dispensers are

stuffed with other manufacturer's paper towels. Georgia-Pacific Consumer Prods. LP v. Myers

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Supply, Inc., 621 F.3d 771 (8th Cir. 2010).1

Claim and Issue Preclusion

"A fundamental precept of common-law adjudication, embodied in the related doctrines

of collateral estoppel and res judicata, is that a right, question or fact distinctly put in issue and

directly determined by a court of competent jurisdiction cannot be disputed in a subsequent suit

between the same parties or their privies." Montana v. United States, 440 U.S. 147, 153 (1979)

(internal quotation and citation omitted). The doctrine of res judicata bars "'repetitious suits

involving the same cause of action' once 'a court of competent jurisdiction has entered a final

judgment on the merits." United States v. Tohono 0 'Odham Nation, 131 S.Ct. 1723, 1730

(2011) (quoting Commissioner v. Sunnen, 333 U.S. 591,597 (1948». The doctrine of collateral

estoppel provides that the actual and necessary determination of an issue by a court of competent

jurisdiction is conclusive. Montana, 440 U.S. at 153. The doctrine of res judicata is an

affirmative defense that is generally waived if not timely raised. F.R.Civ.P. 8(c); Arizona v.

lIn a case filed in the Southern District of Ohio, the court determined that a similar case

by Plaintiff against another of Defendant's distributors would not be barred by a preclusion
defense. Georgia-Pacific Consumer Prods. LP v. Superior Janitor Supply, Inc., 2011 WL
4002563 (S.D.Ohio, September 8, 2011). In that case, recognizing that it was making a "close
call," the district court found that because there had been no finding as to the likelihood of
confusion as to consumers in Ohio and Northern Kentucky or as to the defendant's intent in
selecting the mark that issue preclusion was inapplicable. Superior Janitor Supply, 2011 WL
4002563, *4. The Southern District of Ohio litigation is currently stayed pending resolution in
the Sixth Circuit of the appeal in the Northern District of Ohio case. See DE-67, 1 :09-CV-323,
United States District Court for the Southern District of Ohio.

This Court finds more persuasive the reasoning of the Northern District of Ohio, and

follows its application of a preclusion defense based on the Arkansas case here. This Court is
also aware of an additional trademark infringement case filed by Plaintiff in the District of
Nevada that is also currently stayed. Georgia-Pacific Consumer Prods. LP v. Inland Supply Co.,
Inc., 3:09-CV-246, United States District Court for the District of Nevada.

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California, 530 U.S. 392,410 (2000).

Timeliness ofPreclusion Defenses

As the Court has previously stated, the standard for allowing or denying amendments to

pleadings under Rule 15 is clear: "[m]otions to amend are committed to the discretion of the trial

court." Keller v. Prince George's County, 923 F.2d 30,33 (4th Cir. 1991) (citing Foman v.

Davis, 371 U.S. 178, 182 (1962)); F.R.Civ.P. 15. A court may deny a motion to amend for

"undue delay, bad faith, or dilatory motive on the part of the movant, repeated failure to cure

deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue

of allowance ofthe amendment, futility of amendment, etc." Davis v. Piper Aircraft Corp., 615

F.2d 606,613 (4th Cir. 1980).

Because Defendant promptly alerted the Court to the holding by the Northern District of

Ohio, and because Defendant's actions do not evidence bad faith or dilatory motive, it is

appropriately within the discretion of the Court to allow Defendant to amend its answer to

include preclusion defenses. Alternatively, the Court recognizes that, under some circumstances,

a court may raise a preclusion defense sua sponte and dismiss an action on its own motion.

Arizona, 530 U.S. at 412. "This result is fully consistent with the policies underlying res

judicata: it is not based solely on the defendant's interest in avoiding the burdens of twice

defending a suit, but is also based on the avoidance of unnecessary judicial waste." United States

v. Sioux Nation, 448 U.S. 371,432 (1980) (Rehnquist, J., dissenting).

In light of the circumstances present in this case, which include several lawsuits filed by

Plaintiff attempting to litigate the same core question, the Court finds on its own motion that a

preclusion defense is appropriate in this matter. Accordingly, Defendant's defense of preclusion

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based on the opinion of the Eighth Circuit Court of Appeals affirming the judgment entered in

the Western District of Arkansas and the order issued in the Northern District of Ohio finding

such judgments preclusive is properly before the Court for consideration.

Claims and Issues in the Instant Matter

As noted by the Fourth Circuit, all three of Plaintiffs claims in this matter, trademark

infringement and unfair competition under the Lanham Act and unfair competition under North

Carolina common law, are based on Defendant's conduct in expressly marketing its 81 O-B paper

towels for the purpose of stuffing in Plaintiff s enMotion dispensers, and all three claims will rise

and fall on whether Defendant is liable for contributory trademark infringement. Georgia­

Pacific Consumer Prods., LP v. von Drehle Corp., 618 F.3d 441,450 (4th Cir. 2010). Defendant

can only be liable for contributory trademark infringement if the stuffing of enMotion dispensers

with 81 O-B paper towels by end-user customers constitutes direct trademark infringement. Id. at

451.

In order for Plaintiff to establish trademark infringement, Plaintiff must establish that (1)

it possesses one or more trademarks; (2) that end-user customers used one or more of such

trademarks; (3) in commerce; (4) in connection with the sale, offering for sale, distribution or

advertising of goods; (5) in a manner likely to cause confusion to the relevant public. Id.

(internal citations omitted). In reversing this Court's entry of summary judgment, the Fourth

Circuit found that Plaintiff had satisfied the first, second, third, and fourth elements. Id. at 452.

With regard to the fifth element, the Fourth Circuit held that Plaintiff had "proffered sufficient

evidence for a reasonable jury to find likelihood of confusion among restroom visitors as to the

source of paper toweling being dispensed from enMotion Dispensers when such dispensers are

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stuffed with 810-B Toweling" and remanded the case for trial. Id. at 454.

Res Judicata

The Fourth Circuit applies a three-element test to determine whether a claim is barred by

the principles of res judicata: (I) whether the judgment in the prior action was final and on the

merits; (2) whether the parties in the two actions are identical or in privity; and (3) whether the

causes of action in the two suits are identical. Pueschel v. United States, 369 F.3d 345,354-55

(4th Cir. 2004) (citation omitted). In determining whether the doctrine of res judicata applies, the

court need not find that each of the claims asserted in each case are identical, but rather must

determine whether the claims asserted in each case arise from the same transaction or core of

operative facts. Id. at 355.

As to the first element, the judgment in the prior action in the Western District of

Arkansas was entered following a bench trial and was both final and on the merits. Defendant

has also satisfied the second element as the Plaintiffs in both actions are identical and Defendant

in the Arkansas litigation, as a distributor of von Drehle, and Defendant in this action are in

privity. With regard to the third element, which Plaintiff alleges has not been satisfied, it is clear

to this Court that Plaintiffs claims against Defendant as well as Plaintiffs claims against

Defendant's distributor in the Arkansas (and Northern District of Ohio) case arise from the same

core of operative facts. Plaintiffs claims for trademark infringement and unfair competition in

each of these cases rests on the "stuffing" of other manufacturer's paper towels into its enMotion

paper towel dispenser and whether a likelihood of confusion results from such an act.

Prior to the jury verdict and entry ofjudgment in this case, the Western District of

Arkansas court found, as a matter of fact following bench trial, that the stuffing of enMotion

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dispensers with 81 O-B paper towels did not create a likelihood of confusion and that no

trademark infringement had therefore occurred. Myers Supply, 621 F.3d at 777. Accordingly,

the Court finds that Plaintiffs claim for trademark infringement, upon which its other claims rise

or fall, is subject to an affirmative defense of res judicata by Defendant.

Collateral Estoppel

Similarly, the doctrine of collateral estoppel, or issue preclusion, is established when (1)

the issue sought to be precluded is identical to one previously litigated; (2) the issue was actually

determined in the prior proceeding; (3) the issue's determination was a critical and necessary part

of the decision in the prior proceeding; (4) the prior judgment is final and valid; and (5) the party

against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue.

Collins v. Pond Creek Mining Co., 468 F.3d 213,217 (4th Cir. 2006) (internal citations omitted).

Defendant has also or alternatively satisfied the elements of an issue preclusion defense.

The issue Defendant seeks to be precluded, whether "stuffing" of other manufacturer's paper

towels in Plaintiffs enMotion dispensers constitutes trademark infringement, is identical to the

issue previously litigated in Arkansas. The issue oftrademark infringement was actually

determined by the Arkansas court following a bench trial, and it was a critical and necessary part

of the prior proceeding; indeed, Plaintiffs trademark infringement claim arguably provides the

primary basis for each of these separate actions. The Arkansas judgment is final and valid, and

Plaintiff had a full and fair opportunity to litigate the issue of trademark infringement in a bench

trial on the merits. An affirmative defense of collateral estoppel with regard to Plaintiffs

trademark infringement claim is therefore appropriate.

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Judgment as a Matter ofLaw based on Preclusion Defenses

At bottom, the instant matter and the cases brought by Plaintiff in Arkansas and Ohio

concern the same core of operative facts

the stuffmg of enMotion paper towel dispensers with

paper toweling made by other paper towel manufacturers and the same issue of whether such

practice infringes on Plaintiffs valid trademark. Accordingly, the Court finds that a preclusion

defense based on the earlier judgment entered in the Western District of Arkansas, which was

affirmed by the Eighth Circuit Court of Appeals and held to be preclusive in the Northern

District of Ohio, is justified.

Motionfor New Trial

Defendant moves in its Rule 50(b) motion in the alternative for a new trial. "If the court

grants a renewed motion for judgment as a matter of law, it must also conditionally rule on any

motion for a new trial by determining whether a new trial should be granted if the judgment is

later vacated or reversed." F.R.Civ.P.50(c)(l). A court should grant a motion for a new trial

under circumstances in which it finds that the verdict is against the clear weight of the evidence,

the verdict is based on false evidence, or if the verdict would result in a miscarriage ofjustice.

Columbia Colleton Medical Ctr., 290 F.3d at 650.

As this Court's entry ofjudgment as a matter oflaw is based on the determination that the

doctrines of res judicata and collateral estoppel preclude Plaintiffs litigation of its claims against

Defendant, a new trial would be unnecessary should the appellate court reverse or vacate this

Court's finding on preclusion. Accordingly, Defendant's motion for a new trial is conditionally

denied.

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CONCLUSION

For the foregoing reasons, Defendant's Motion for Judgment as a Matter of Law is

GRANTED and Defendant's Motion for New Trial is conditionally DENIED. The jury verdict

entered in this matter on January 6, 2012, in favor of Plaintiff is hereby SET ASIDE and

judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure is

entered in favor of the Defendant. The Clerk is DIRECTED to enter judgment accordingly.

Because Plaintiff is no longer the prevailing party, Plaintiff s Motion for Permanent

Injunction [DE 322], Motion for Bill of Costs [DE 324], and Motion for Attorney Fees [DE 325]

are DENIED AS MOOT. Defendant's Motion to Stay Execution [DE 327] and Motion for

Reconsideration re: Proffer of Testimony [DE 331] are also DENIED AS MOOT.

SO ORDERED, this U- day of March, 2012.

ERRENCE W. BOYLE

UNITED STATES DISTRICT J

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