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J.R. Simplot Co. v. McCain Foods USA, Inc.

United States District Court, D. Idaho

July 1, 2019

J.R. SIMPLOT COMPANY, Plaintiff,
v.
McCAIN FOODS USA, INC., Defendant. McCAIN FOODS LIMITED, Plaintiff,
v.
J.R. SIMPLOT COMPANY, Defendant.

          MEMORANDUM DECISION AND ORDER

          David C. Nye Chief U.S. District Court Judge.

         I. INTRODUCTION

         Pending before the Court is Plaintiff J.R. Simplot Company's (“Simplot”) Motion for Leave to File Third-Party Complaint (Dkt. 88), Defendant McCain Foods Limited's (“McCain”) Motion to Compel (Dkt. 93) and Simplot's Motion to Amend/Correct Protective Order (Dkt. 98). Having reviewed the record and briefs, the Court finds that the facts and legal arguments are adequately presented. Accordingly, in the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, the Court will decide the Motions without oral argument. Dist. Idaho Loc. Civ. R. 7.1(d)(1)(B). For the reasons set forth below, the Court finds good cause to GRANT Simplot's Motion for Leave to File Third-Party Complaint, GRANT in PART and DENY in PART McCain's Motion to Compel, and GRANT Simplot's Motion to Amend/Correct Protective Order.

         II. BACKGROUND

         On January 11, 2019, the Court issued its Memorandum Decision and Order (Dkt. 86) granting McCain's Motion for Partial Reconsideration. In its Motion to Reconsider, McCain petitioned the Court to revisit its Markman definition of the term “high electric field.” Dkt. 70. Ultimately, the Court did redefine the term to more fully align with the purpose of the patent rather than relying on examples, or a preferred embodiment, to restrict the construction of the term-as it had originally.

         On January 24, 2019, Simplot Filed a Motion for Leave to File a Third-Party Complaint. Dkt. 88. In its Motion, Simplot seeks to file a Third-Party Complaint against Elea Vertriebsund-Vermarktungsgesellshaft, mbH (“Elea”) and Food Physics, LLC (Food Physics”).

         On February 21, 2019, McCain notified the Court that the parties had reached an impasse regarding certain discovery matters-namely the disclosure and/or protection of certain financial information. Pursuant to the Court's standard practice regarding discovery disputes, the parties submitted position papers outlining their respective concerns and a telephonic mediation was held in an effort to informally resolve the matters. Ultimately, both parties elected-as was their prerogative-to move forward with formal motions after the informal mediation proved unsuccessful. McCain filed a Motion to Compel, asking the Court to require that Simplot turn over the sought-after information, and Simplot filed a Motion to Amend/Correct the Protective Order asserting that it would only turn over the requested information if there were substantial protections in place.

         The Court will address each Motion in turn.

         III. ANALYSIS

         A. Simplot's Motion for Leave to File a Third-Party Complaint (Dkt. 88)

         1. Background

         On February 21, 2017, McCain filed its Complaint for Patent Infringement against Simplot in the Northern District of Illinois. On August 9, 2017, the Northern District of Illinois transferred McCain's lawsuit to this District, and on November 9, 2017, the Court granted McCain's Motion to Consolidate its lawsuit with a pending action for design patent infringement and trade dress infringement that Simplot had previously filed against McCain. Dkt. 40.

         In the patent infringement portion of this case, McCain alleges that Simplot directly infringed U.S. Patent No. 6, 821, 540 (“the ‘540 Patent”) by using Elea PEF Systems in the United States to treat fruits and vegetables.

         Simplot, however, does not design or manufacture any of the Elea PEF Systems accused of infringement. In fact, Simplot purchased four of the accused Elea PEF Systems directly from Elea and one accused Elea PEF System from Elea's exclusive North American Distributor, Food Physics. Simplot asserts that it purchased the accused Elea PEF Systems based on: (1) Elea and Food Physics' express warranty that the ELEA PEF Systems do not infringe any third party's patent, including the ‘540 Patent; and (2) Elea and Food Physics' agreement to defend, indemnify, and hold Simplot harmless from any claim of infringement, including claims for infringement of the ‘540 Patent, based on Simplot's use of the Accused Elea PEF Systems.

         Simplot alleges that it notified Elea and Food Physics of the McCain Complaint and the allegations therein, and further, that it demanded indemnity and defense pursuant to the terms of the Equipment Furnish Only Purchase Contracts signed between Simplot, Elea, and Food Physics. According to Simplot, Elea and Food Physics have not agreed to assume their indemnity obligations and have not agreed to defend Simplot against McCain's infringement claims.

         On January 23, 2019, Simplot filed a separate lawsuit against Elea and Food Physics to pursue these indemnity claims. That suit, No. 1:19-cv-00024, is currently pending before United States Magistrate Judge Candy W. Dale. Judge Dale has stayed her case in light of Simplot's Motion for Leave to File Third-Party Complaint in this case-which Simplot filed the day following the filing of the independent case against Elea and Food Physics. Simplot reasons that allowing a third-party Complaint in this case makes the most sense, but states that in the event the Court denies its request, it will nonetheless pursue its claims independent of this litigation. Similarly, if the Court grants the instant request, Simplot asserts that it will voluntarily dismiss its companion suit pending before Judge Dale.

         2. Legal Standard

         The impleader provision of Federal Rule of Civil Procedure 14 allows a defendant to “serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it.” Fed.R.Civ.P. 14(a)(1). The purpose of impleader is to “promote judicial efficiency by avoiding separate actions against third parties who may be liable to defendant for part or all of a plaintiff's original claim.” Whitt v. Papa Murphy's Int'l, LLC, No. 1:18-CV-00231-BLW, 2018 WL 6310265, at *1 (D. Idaho Dec. 3, 2018) (internal citation omitted); see also Huntsman Advanced Materials LLC v. OneBeacon Am. Ins. Co., No. 1:08-CV- 00229-BLW, 2012 WL 5285901, at *2 (D. Idaho Oct. 25, 2012). Impleader is appropriate where “a defendant is attempting to transfer to the third-party defendant the liability asserted against him by the original plaintiff.” Whitt, 2018 WL 6310265, at *1 (quoting Stewart v. Am. Int'l Oil 7 Gas Co., 845 F.2d 196, 200 (9th Cir. 1988)).

         “The decision to implead a third-party defendant is addressed to the sound discretion of the trial court.” Sw. Administrators, Inc. v. Rozay's Transfer, 791 F.2d 769, 777 (9th Cir. 1986); Huntsman, 2012 WL 5285901, at *2-3. In exercising discretion whether to grant leave to file a third-party complaint, courts have considered a number of factors, including: (1) timeliness of the motion; (2) whether impleader would delay or unduly complicate the trial; (3) prejudice to the third party; and (4) prejudice to the “original plaintiff.” Id., see also Zero Tolerance Entm't, Inc. v. Ferguson, 254 F.R.D. 123, 127 (C.D. Cal. 2008); 6 Fed. Prac. & Proc. Civ § 1443 (3d ed.).

         3. Analysis

         Before turning to specific factors, the Court will address Simplot's overarching argument that judicial economy favors granting its Motion for Leave to File Third-Party Complaint. As this Court noted previously in this case, “avoiding duplicative work, unnecessary expense to clients, inconsistent results, and excessive use of judicial resources” is of paramount importance. The Court made that determination in relation to the issue of consolidation, but the reasoning rings true here as well-and to some degree, interpleader is consolidation. Here, Elea and Food Physics are already involved in this case. While their degree of involvement is not as significant as it will undoubtedly be if joined as third-party Defendants, allowing Simplot to litigate these related issues in this lawsuit would conserve judicial resources.

         The current case and underlying design and utility patent infringement claims, as well as the trade dress infringement claim, are complicated issues. This Court is deeply invested in those issues and while the new allegations against Elea and Food Physics are not identical claims per se-they are, after all, essentially just contract claims about patent infringement indemnity-this Court is in a good position to take those issues up with limited additional work and resources.

         This Court is keenly aware of the parties, facts, legal issues, and rulings applicable in this case. While Judge Dale is undoubtedly qualified to hear such a case, a separate lawsuit is unnecessary as this Court could quite easily address an ancillary issue related to indemnification. Finally, the whole issue of indemnification is interwoven with the issue of infringement itself and may or may not even become relevant. This Court will be at the forefront of those determinations and is best suited to address the issue-again, should it even arise.

         The Court will briefly address some of the guiding factors previously outlined.

         a. Timeliness of the Motion

         McCain argues that Simplot's Motion is untimely because 1) it could have filed such a motion sooner, and 2) allowing amendment at this stage will inevitably delay trial.

         Taking the issues up in reverse order, the Court finds McCain's “trial date” argument meritless as no trial date is set in this matter.[1] Discovery is ongoing at this point and the dispositive motion deadline is many months away. With the relatively simply issues at play between Simplot and Elea, it is unlikely that further extensions of any deadlines will be necessary-at least for those reasons.

         To be sure, Simplot's actions should not unduly, or unfairly, prejudice McCain, but Simplot is within its right to bring in a potentially liable party to defend itself against McCain's claims of infringement. Further, it will be up to Simplot to timely and efficiently undertake preparation for its claims against Elea. Simplot asserts that the discovery related to its Third-Party claims is “minimal” and can likely be completed within the already set timeframe. The Court is not sure if this is possible or not, but again, a 4-8 week delay (for example) in this case is still a far cry from the resources that would be necessary to conduct separate litigation and trials.[2]

         Laying aside trial dates, stays, and calendaring, the Court finds that Simplot filed this Motion as soon as it became reasonably necessary. Simplot has been diligently litigating this matter. Early on in this case-and particularly following the Court's original Markman decision-Simplot was operating under the impression that its use of the PEF technology did not even qualify as a protected use under the ‘540 patent. While that position-or a variation of that position-might yet prevail in one form or another, following the Court's reversal of its definition of the disputed claim term “high electric field, ” Simplot determined that now was the appropriate time to bring Elea and Food Physics into this suit. In fact, it was a mere 13 days after the Court's Decision on McCain's Motion to Reconsider when Simplot filed its Motion for Leave to Filed a Third-Party Complaint.

         All things considered, the Court finds that Simplot's Motion was timely filed.

         b. Complication of issues/trial

         Next, the Court turns to the issue of confusion. Simplot asserts that its third-party complaint will not result in confusion because the additional issues-unlike complex patent matters-are simple contractual disputes. Simplot further claims that interpleader will actually simplify trial as it will illicit answers to inevitable jury questions regarding Elea's liability or defense. The Court is not entirely sure that a jury would understand third-party indemnification in patent cases as a matter of course, but can appreciate Simplot's position that with overlapping witnesses and testimony, it would be expedient to try the issues together.

         For its part, McCain asserts that including these issues with the underlying patent claims will complicate the structure of the trial and confuse the jury.[3] McCain's main concern seems to be that Simplot's third-party claims may mislead a jury into thinking that Elea and Food Physics' products are what directly infringed on the ‘540 patent rather than Simplot's use of those products and its process (wherein potential infringement actually lies).

         Simplot counters that it fully understands the difference between products and processes and notes that its agreement with Elea and Food Physics warrantied that Simplot's use would not infringe any patent-i.e. it is Simplot's position that the patented process is what Elea and Food Physics must indemnify it from in the first place. Whether a jury would conflate products and processes is ultimately irrelevant because, as Simplot notes, the Court can clear up “any confusion that could otherwise occur as a result of impleading Elea and Food Physics.” Dkt. 91, at 11. That said, the parties are likewise responsible for ensuring that misunderstanding and error do not occur during trial.

         While McCain may have concerns regarding potential confusion at trial, it will have a full and fair opportunity to explain and clarify anything it fears may be unclear. As the Court noted previously, “juries frequently hear cases is which various claims require different evidence, testimony, and even standards of proof. With appropriate preparation, the Court can adequately instruct a jury to avoid any confusion.” Dkt. 40, at 5.

         To be sure, this final concern-jury confusion-is the subject of McCain's request that, in the event the Court allows Simplot to file its third-party complaint, it should nonetheless sever, or bifurcate, these claims and try them separately.

         However, such a course of action would (at least to some small degree) defeat the purpose of interpleader. While the Court would be the same, holding two trials would still result in added time and expense.

         More importantly, however, there are ways to alleviate McCain's concerns short of severing Simplot's third-party claims. McCain is concerned about infringement, liability, and indemnification. As McCain correctly points out, Simplot's claims against Elea and Food Physics do not relate to the underlying liability claims per se and are, in fact, contingent upon the resolution of those claims. While the Court agrees with this idea-that the jury may not even need to address Elea and Food Physics depending on its findings of infringement-the solution is not necessarily to hold a separate trial, but to hold off on the indemnification portion of the trial until the infringement portion is dealt with.[4] In fact, as the Court has already noted, it might already have to do something along these lines. See Dkt. 40, at 6 (noting that while consolidation of the design patent claims, the utility patent claims, and the trade dress infringement claims was appropriate, severing the issues for trial may be necessary depending on how the case played out).

         In short, McCain has expressed valid concerns; however, the Court will not make a determination at this time regarding bifurcation or severance of the third-party claims- or any of the claims at issue in this case. For the reasons outlined above, the Court finds it unlikely that it would hold completely separate trials in these matters, however, it might structure the trial in ...


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