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TrueNorth Companies, L.C. v. TruNorth Warranty Plans of North America, LLC

United States District Court, N.D. Iowa, Cedar Rapids Division

December 7, 2018

TRUENORTH COMPANIES, L.C.; TRUENORTH PRINCIPALS, L.C., Plaintiffs,
v.
TRUNORTH WARRANTY PLANS OF NORTH AMERICA, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Leonard T. Strand, Chief Judge

         I. INTRODUCTION

         This case is before me on a motion (Doc. No. 62) for preliminary injunction and motion (Doc. No. 65) to exclude expert opinions, testimony and evidence by plaintiffs TrueNorth Companies, L.C., and TrueNorth Principals, L.C. (collectively TrueNorth). Defendant TruNorth Warranty Plans of North America, LLC (TN Warranty) has filed resistances to both, see Doc. Nos. 88 and 89, along with a sealed supplemental resistance. See Doc. No. 96. TrueNorth has submitted replies. Doc. Nos. 100 and 105.

         Also before me are TN Warranty's motions (Doc. Nos. 90, 91) to amend/correct the protective order and extend pre-trial deadlines. TrueNorth has filed resistances (Doc. Nos. 101 and 103) and TN Warranty has filed replies (Doc. Nos. 114 and 115).

         I held a hearing on the motions on October 26, 2018, and allowed the parties to submit supplemental exhibits. See Doc. Nos. 121, 122, 123. TrueNorth followed up with a motion (Doc. No. 124) to strike the exhibits filed as Doc. Nos. 122-1, 122-2, and portions of Doc. No. 123-1. TN Warranty filed a third set (Doc. No. 125) of supplemental exhibits and a resistance (Doc. No. 126) to TrueNorth's motion to strike. Finally, as if attempting to prove Yogi Berra's famous observation that “it ain't over till it's over, ”[1] TN Warranty has filed a motion (Doc. No. 127) for leave to supplement its resistance to TrueNorth's motion for preliminary injunction, which TrueNorth resists (Doc. No. 128).[2]

         II. FACTUAL AND PROCEDURAL BACKGROUND

         A. Procedural Background

         TrueNorth filed its original complaint (Doc. No. 2) on March 28, 2017, alleging two counts of trademark infringement, one count of mark dilution, [3] one count of false designation of origin and one count of mark infringement under Iowa law based on the parties' respective design logos: Plaintiffs':

         (Image Omitted)

         On November 27, 2017, TrueNorth amended its complaint to add two new counts: Count VI for false advertising under the Lanham Act and Count VII for unfair competition under the Lanham Act and common law. The parties then submitted a joint motion (Doc. No. 47) for revised deadlines, which Judge Williams granted. See Doc. Nos. 47, 48. The order established July 9, 2018, as the deadline for disclosure of defendant's expert witnesses. See Doc. No. 48 at 3. This deadline was later extended to July 30, 2018. Doc. No. 61.

         On August 20, 2018, TrueNorth filed its motion for a preliminary injunction and motion to exclude TN Warranty's expert. It seeks a preliminary injunction to stop TN Warranty from using any mark similar to the TrueNorth mark. TrueNorth alleges that since filing the lawsuit, it has received several communications from truck drivers and industry professionals demonstrating confusion about the affiliation between TN Warranty and TrueNorth. It also seeks to exclude TN Warranty's expert based on an alleged failure to disclose materials the expert relied upon under Rule 26(b)(4)(C).

         B. Nature of the Parties' Businesses

         TrueNorth was formed in August 2000 by the merger of three financial services entities. See Doc. No. 68 at 2. It provides financial and insurance services to a variety of clients nationwide including comprehensive property and casualty insurance, risk management and underwriting services. Id. at 2, 4. It also provides other specialized products and services to commercial transportation companies and individual drivers including transportation risk management, transportation property insurance and transportation equipment insurance. Id. TrueNorth originated in eastern Iowa and now has offices in Tennessee, Texas, Illinois, Michigan and Colorado.

         TN Warranty was formed on September 1, 2015, to market and sell commercial truck warranties. See Doc. No. 88 at 4. Its products provide extended warranty services for mechanical components for used commercial vehicles manufactured by others whose original manufacturer's warranty has expired. Id. at 5. It markets its services through a network of independent truck dealers or “authorized retailers, ” who purchase and resell its warranty products. Id. The end user of TN Warranty's products is a truck owner or fleet owner who owns the truck(s) covered by the warranties. Id. TN Warranty estimates that approximately 80 percent of its authorized retailers are used truck dealers who sell TN Warranty products at the point of sale at or near the same time they close a deal for the sale of a used truck. Id. It estimates that approximately 15 percent of its warranties are sold by finance companies that provide the financing for the truck and approximately 5 percent of its warranties are sold by repair facilities. Id. It states that in rare circumstances (a fraction of one percent of sales), TN Warranty sells a warranty directly to an end consumer. Id. at 6.

         TN Warranty has six sales representatives who work directly with its authorized retailers. The representatives are assigned geographic regions and are encouraged to travel regularly to visit the authorized retailers in person. Id. TN Warranty relies heavily on word of mouth and invests substantial resources into making sure its sales team meets face-to-face with dealers and retailers to discuss and educate them about TN Warranty's products. Id. When recruiting new authorized retailers, TN Warranty states it makes in-person visits to explain, in detail, who it is, what it does and what it offers. Id. TN Warranty provides training to authorized retailers about its products and TN Warranty's expectations in selling its products. Id. at 7.

         TN Warranty advertises and markets its products to truck dealers. Id. It states its largest marketing investment is in travel for its sales representatives. Id. Additional marketing includes direct emails to authorized retailers, its website and branding and marketing at the annual gathering of the Used Truck Association. Id. Dealers around the country attend this event and not individual truckers. Id. at 7-8.

         TN Warranty states it does not market or sell insurance products. Id. at 8. It states that in training new authorized retailers, it emphasizes that it is not selling insurance, but a limited warranty. It does not compete with providers of insurance products and does not market its warranty products through insurance brokers or agents. Id. It contends that neither it, nor its authorized retailers, have encountered TrueNorth in the marketplace. Id. TN Warranty states an authorized retailer has never contacted it inquiring about the association between the two entities. It is unaware of any other entities that market insurance to the end user in the same way that TN Warranty markets its products. The used truck dealers, finance managers or repair companies that TN Warranty works with and that sell its products do not also offer insurance. Id.

         TN Warranty works directly with the authorized retailer when one of its products is sold. It invoices the authorized retailer and the authorized retailer pays TN Warranty. Id. The authorized retailer will pay for the cost of the warranty in one lump sum and often for a package of several different warranty products for different trucks at one time. A used truck dealer or finance company may finance the resale cost of the warranty with the price of the truck such that the customer may pay for the warranty through monthly payments. Id. at 9. All warranties require an inspection of the truck and TN Warranty's approval. TN Warranty may ask the authorized retailer to provide more information about a truck, such as a photo or a correction in the application prior to issuing a warranty.

         Authorized retailers market TN Warranty's product to two classes of customers: large operators who have a fleet of trucks and independent owner/operators. Authorized retailers answer customer questions regarding the warranty options. Id. at 10. TN Warranty states that most customers are interested in coverage, cost and convenience rather than the provider of the warranty. Id.

         C. History of the Parties' Marks

         TrueNorth Principals, L.C. has three registered trademarks. Doc. No. 68 at 2. On December 11, 2001, it received Registration Number 2, 517, 502 for the logo below:

         (Image Omitted)

         Id. at 3. On September 26, 2006, it received Registration Number 3, 149, 332 for the text “TRUENORTH.” Id. On October 10, 2006, it received Registration Number 3, 154, 664, which covers TRUENORTH and the design shown below:

         (Image Omitted)

         Id. TrueNorth Principals, L.C. issued exclusive licenses to use these trademarks to TrueNorth Companies, LLC. TrueNorth represents it has consistently used the word “TrueNorth” with the above logo designs since 2000. Id. at 4. It states it has invested over $30 million in marketing efforts to strengthen its brand locally and nationally. Id.

         The history of TN Warranty's mark begins in 2015. Doc. No. 88 at 10. At that time, Carrbridge Berkshire Group, Inc. (Carrbridge) began marketing warranty products through its division Berkshire Fleet Services (Berkshire Fleet). The warranty products themselves were provided by CompassOne Warranty Plans of North America LLC (an offshoot of a family of companies under the umbrella The Compass Group, Inc., founded by William “Kirk” Eskridge in 2002). Id. at 11. Eskridge, who was the chief executive of Carrbridge, formed CompassOne Warranty in April 2015. Id. CompassOne Warranty used the following mark to market its warranty products.

         (Image Omitted)

         Id. TN Warranty contends that from 2002 through 2012, The Compass Group, Inc. owned and used a Vector Compass mark created by a digital marketing firm hired by Compass Group. Id. It states that CompassOne Warranty's graphic was derived from the Vector Compass mark. Id. at 12.

         On March 30, 2015, American Guardian Warranty Services, Inc. (American Guardian) filed a lawsuit against Carrbridge and Berkshire Fleet claiming that the use of the term “Compass” infringed on American Guardian's intellectual property rights. Id. American Guardian claimed it had been using its Compass mark since in or around 2005. Eskridge agreed to change the name and mark and ceased operating CompassOne Warranty.[4] Id. at 13.

         On September 1, 2015, Eskridge formed TN Warranty. Id. It used the same Vector Compass mark as CompassOne to promote its products. It states it chose the name “TrüNorth” to pay homage to its CompassOne Warranty and Compass Group roots. Id. It chose to use a dieresis (ü) in its mark to give the brand an international feel, consistent with the company's international aspirations. Id. Thus, TN Warranty began using its “TRÜNORTH” mark and compass design (below) sometime in late 2015.

         (Image Omitted)

         Id.

         TN Warranty filed an application to register its mark with the United States Patent and Trademark Office (USPTO) on February 5, 2016. Id. at 14. On October 31, 2016, TrueNorth filed an opposition to the application. Doc. No. 68 at 5. On December 20, 2016, the USPTO issued a notice of default regarding TN Warranty's application because it failed to answer TrueNorth's opposition. Id. On February 16, 2017, the USPTO entered a judgment by default against TN Warranty, sustaining TrueNorth's opposition and denying TN Warranty's application for a trademark. Id.

         D. History of Dispute Between Parties

          In September 2015, TrueNorth learned of TN Warranty's mark when Joe Hoovestol of Lone Mountain Leasing in Carter Lake, Iowa, forwarded an email he had received from Rick VanHove, a Regional Sales Director for TN Warranty. Doc. No. 68 at 5. On January 19, 2016, TrueNorth sent a cease and desist letter to Eskridge, TN Warranty's CEO, demanding that TN Warranty stop using the word “TRÜNORTH” or the logo stating that it infringed on TrueNorth's marks. Id. On August 23, 2016, TrueNorth received an application for insurance from one of its clients in the trucking industry. Id. at 6. Among the forms submitted with the application included a Component Breakdown Limited Warranty Agreement form for TRÜNORTH™. Id. TrueNorth ultimately filed this action on March 28, 2017.

         After TrueNorth filed suit, TN Warranty attempted to reach a negotiated arrangement but those efforts were not successful. Id. at 17. TN Warranty states that it then voluntarily redesigned its mark as follows:

         (Image Omitted)

Id. TN Warranty asserts that it began implementing this design in May 2018. It is displayed on its website (https://www.trunorthwarranty.com) and TN Warranty represents that it is in the process of using this design on all print and online marketing materials. Id.

         TN Warranty provides additional background concerning a non-party, Gateway Management Services, Ltd., d/b/a Premium 2000 (Premium 2000), and its President and Chief Executive Officer, Lynn Murphy. Id. at 17. TN Warranty states that Murphy and Eskridge were business partners at one time but are now rivals and competitors. Id. It alleges that Murphy (and affiliates) have filed various lawsuits against Eskridge and his affiliates. Id. at 18-19. With regard to this lawsuit, TN Warranty claims that Premium 2000 has offered to do business with TrueNorth, but has cited TN Warranty's name and mark as a “road block” to doing business. Id. at 20 (citing Doc. No. 85-9 consisting of emails from Premium 2000's attorney to counsel for TrueNorth). See also Doc. No. 123-1 (excerpts from Murphy's deposition). Essentially, TN Warranty contends that this evidence suggests that TrueNorth's lawsuit is premised more on Murphy's animosity towards Eskridge rather than on true confusion in the marketplace. See Id. at 17-22.

         TrueNorth has provided a detailed summary of emails and phone calls[5] it has received from truck drivers and professionals within the trucking and insurance industries that allegedly demonstrate confusion in the marketplace between TN Warranty and TrueNorth. See Doc. No. 68 at 6-10. It contends these communications speak for themselves and that Premium 2000 has nothing to do with TN Warranty's own actions in choosing a mark or the alleged, resulting harm to TrueNorth. See Doc. No. 105 at 15-16.

         E. TN Warranty's Expert Disclosures

         TrueNorth's other motion (Doc. No. 65) concerns TN Warranty's expert, Christopher King. TrueNorth states that with respect to damages, it relies on an unjust enrichment/profit disgorgement theory pursuant to 15 U.S.C. § 1117(a). TrueNorth alleges that an “Expert Rebuttal Report on Damages” authored by King and disclosed by TN Warranty reveals that much of the information King relied upon to form his opinions was not provided to TrueNorth in discovery and was not included with TN Warranty's expert disclosures. See Doc. No. 65 at 2. TrueNorth argues TN Warranty is required to produce the information under Federal Rule of Civil Procedure 26(a)(4)(C). Id. at 2-3. TrueNorth claims that it has been prejudiced by TN Warranty's refusal to produce the information because its own expert is unable to rebut that opinion without the underlying information. It requests that King's opinions and testimony be excluded. Id. at 3-4.

         TN Warranty states it had legitimate and serious concerns regarding confidentiality when it produced King's expert report, which is why it withheld commercial and financial information in connection with that report. Doc. No. 89 at 1. It states that it proposed creating additional confidentiality safeguards before producing the information and extending the deadline for TrueNorth to depose King and submit any rebuttal expert report. Id. at 2. TN Warranty contends this information is purely supplemental and therefore, its disclosure timely. To the extent it is not supplemental, it contends that any delay is substantially justified by its confidentiality concerns. Id.

         TN Warranty's alleged confidentiality concerns stem from its history with Premium 2000 and Murphy. Id. at 3-9. TN Warranty states that it is concerned that any financial information produced through this case may be leaked to Premium 2000, which TN Warranty fears Premium 2000 would then use against it. Id. at 9. TN Warranty states that Eskridge even refused to turn over TN Warranty's financial records to King, TN Warranty's own expert witness, based on his fear that the records would make their way to Premium 2000. Id. TN Warranty explains that when it submitted King's expert report, it notified TrueNorth about its confidentiality concerns. Id. at 10. TN Warranty notes that Premium 2000 has been a subject of this litigation throughout discovery. Id.

         Prior to serving King's expert report, TN Warranty states that it conferred with opposing counsel by phone about its confidentiality concerns regarding Premium 2000. Counsel for TrueNorth stated that it was contemplating filing a motion to compel or motion to exclude. Id. at 11. After this phone call, TN Warranty's counsel considered moving to amend the Protective Order.[6] However, TrueNorth filed its motion to exclude 10 days after counsels' phone call. Id. Eskridge then provided the financial records to King so he could supplement his opinion on TN Warranty's profits from the sale of its warranty products during the relevant time period. Id. TN Warranty states that Eskridge agreed to turn over these documents only if the Protective Order was amended to prohibit Randall Rings (Secretary and General Counsel for TrueNorth) from having access to the information. Id.

         TN Warranty acknowledges it has not yet produced the financial records, but intends to do so, along with the supplement to the King report. Id. at 12. It states that four days after TrueNorth filed its motion to exclude, TN Warranty proposed, via letter, a resolution to the discovery dispute in the form of additional protections for the financial documents. See Doc. No. 89-10. TrueNorth rejected that proposal via letter on September 6, 2018. See Doc. No. 89-11. TN Warranty asked TrueNorth to reconsider and submitted a proposed revised protective order. See Doc. No. 89-12. The proposed amendment consists of an additional category of information titled “Highly Confidential Plus Material.” Id. It specifically seeks prohibiting disclosure to the non-producing party and in-house counsel of the non-producing party. Id. TrueNorth rejected the proposal that day.

         III. APPLICABLE STANDARDS

         A. Preliminary Injunction

         The purpose of a preliminary injunction is to “preserve the relative positions of the parties until a trial on the merits can be held.” Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981). The Lanham Act authorizes a preliminary injunction in favor of the owner of a registered trademark. 15 U.S.C. 1116(a). The Eighth Circuit relies on the Dataphase factors to determine whether to issue a preliminary injunction with regard to conduct that allegedly violates the Lanham Act. See United Industries Corp. v. Clorox Co., 140 F.3d 1175, 1179-84 (8th Cir. 1998). These factors are:

1. the threat of irreparable harm to the movant
2. the state of the balance between this harm and the injury that granting the injunction will inflict on other parties
3. the probability that the movant will succeed on the merits
4. the public interest

Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc). While no single factor is dispositive, the Eighth Circuit has stated that “likelihood of success on the merits is most significant.” Laclede Gas Co. v. St. Charles Cnty., Mo., 713 F.3d 413, 419 (8th Cir. 2013) (quoting Minn. Ass'n of Nurse Anesthetists v. Unity Hosp., 59 F.3d 80, 83 (8th Cir. 1995)). In evaluating the factors, I must “flexibly weigh the case's particular circumstances to determine whether the balance of equities so favors the movant that justice requires the court to intervene.” Hubbard Feeds, Inc. v. Animal Feed Supplement, Inc., 182 F.3d 598, 601 (8th Cir. 1999). “The party seeking injunctive relief bears the burden of proving all the Dataphase factors.” Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003).

         B. Expert ...


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