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JFJ Toys, Inc. v. Sears Holdings Corp.

United States District Court, D. Maryland

February 21, 2017

JFJ TOYS, INC., et al., Plaintiffs,
v.
SEARS HOLDINGS CORPORATION, et al., Defendants.

          MEMORANDUM OPINION

          Paula Xinis United States District Judge.

         Pending is a Motion to Exclude the expert report and testimony of Peter Magalhaes (ECF No. 82) and a Motion for Partial Summary Judgment (ECF No. 71) filed by Plaintiffs/Counter Defendants JFJ Toys, Inc. and Fred Ramirez (collectively, “Plaintiffs”). The issues are fully briefed and the Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. For the reasons stated below, Plaintiffs' Motion to Exclude is granted and Plaintiffs' Motion for Partial Summary Judgment is granted in part and denied in part.

         I. BACKGROUND[1]

         Plaintiff JFJ Toys, Inc. d/b/a D&L Company (“JFJ”) is the manufacturer and distributor of a children's toy product-an air missile toy known and trademarked as STOMP and STOMP ROCKET. ECF No. 1 at 1; Declaration of Fred Ramirez, ECF No. 71-6 at 2. The air missile toy was manufactured and sold by JFJ until on or about January 1, 2015, when D&L Company LLC (“D&L”) was formed. ECF No. 71-6 at 2. Plaintiff Fred Ramirez (“Plaintiff Ramirez”) is the sole owner of D&L. ECF No. 71-6 at 2. D&L is now responsible for the manufacture and sale of Plaintiffs' STOMP ROCKET brand products under a license from Plaintiff Ramirez. ECF No. 71-6 at 2.

         In 1992, Plaintiff Ramirez began marketing the “Stomp Rocket.” ECF No. 71-6 at 1. On February 2, 1999, “STOMP ROCKET” was registered by Plaintiff Ramirez with the United States Patent and Trademark Office (“USPTO”), under U.S. Registration No. 2, 221, 554, for use in connection with “toys, namely, flying winged tubes and structural parts therefor” (the “Stomp Rocket Registration”). See ECF No. 71-11. The Stomp Rocket Registration was renewed on June 26, 2008, and it became incontestable under 15 U.S.C. §1065 on October 30, 2009. ECF No. 71-15. On April 4, 2000, “STOMP” was registered by Plaintiff Ramirez with the USPTO, under Registration No. 2, 338, 580, for use in connection with “toys, namely, flying winged tubes and structural parts therefor” (the “Stomp Registration”). ECF No. 71-16. The Stomp Registration became incontestable under 15 U.S.C. §1065 on June 27, 2006, and was last renewed on August 23, 2010. ECF No. 71-16 at 3.

         Since 1992, JFJ and D&L have produced several versions of the Stomp Rocket brand air missile toys, including the Stomp Rocket, Super Stomp Rocket, Junior Stomp Rocket, Ultra Stomp Rocket, Stomp Rocket Super High Performance, Stomp Rocket Ultra, Stomp Rocket Ultra LED, Stomp Rocket Jr. Glow, and Dueling Stomp Rocket. ECF No. 71-6 at 2; ECF No. 71-37. All versions of the Stomp Rocket brand toy use an air bladder and flex tubing to launch lightweight, winged missiles into the air. ECF No. 71-6 at 2. However, Plaintiffs' Stomp Rocket kits vary in the number of missiles included, the type of materials used in manufacturing, the projectile flight path (100'- 400') and the targeted age group (three and up to eight and up). Id. Since 1992, Stomp Rocket brand air missile toys have sold more than 5 million units and have won awards from iParenting Media (Hot Toy and Excellent Product Awards) and Creative Child Magazine (Top Toy of the Year, Seal of Excellence and Preferred Choice Awards). See ECF No. 71-6 at 2; ECF No. 95-1.

         Defendant Sears Holding Corporation is the holding company of Defendants Sears and Roebuck, Co. and Kmart Corporation (collectively, “Sears”), which operate approximately 1, 700 retail stores in the United States, selling tens of thousands of products including children's toys. ECF No. 78-19 at 2 (Sears Holding Corporation's public business profile). In 2013, Defendants entered into an agreement with Toy Quest Ltd. (the “Purchase Order”) to purchase 10, 596 units of a BANZAI-brand air missile toy called the Stomp Rocket (the “Banzai Stomp Rocket”). See ECF No. 72-1.[2]

         Defendants began selling the Banzai Stomp Rocket on January 14, 2014, online on Sears.com and Kmart.com and in Kmart retail stores. See ECF No. 71-38 at 4; ECF No. 71-39; ECF No. 72-19 at 8. When Defendants began selling the Banzai Stomp Rocket, Defendant Sears was simultaneously selling Plaintiffs' Stomp Rocket Ultra, Stomp Rocket Junior Glow, Stomp Rocket High Performance, Dueling Stomp Rocket, and Stomp Rocket Ultra LED on its website, www.sears.com. ECF Nos. 71-40, 71-41, 71-42, 71-43.The Banzai Stomp Rocket sold by Defendants uses a mark that includes the words “Stomp Rocket.” ECF No. 95-7 (see below for photograph of Defendants' Banzai Stomp Rocket on left and Plaintiffs' Super Stomp Rocket on right).

         (Image Omitted)

         On April 29, 2014, Seth Ramirez, General Manager of JFJ and D&L, became aware that Defendant Kmart was selling the Banzai Stomp Rocket on Defendant's website www.kmart.com. Declaration of Seth Ramirez, ECF No. 71-8 at 1. Shortly thereafter, on May 4, 2014, Plaintiffs' counsel sent a cease and desist letter to Defendants. ECF No. 95-7 at 2. Plaintiffs sent a second cease and desist letter on May 19, 2014. ECF No. 95-7 at 5. On June 17, 2014 and again on June 26, 2014, Plaintiffs' counsel, Susan Lutzker, purchased the Banzai Stomp Rocket from www.kmart.com. See ECF No. 95-7 at 11-15. In each case, the email purchase confirmation used the mark “Stomp Rocket” to refer to the item purchased by Ms. Lutzker. Id. Following receipt of the cease and desist letter, Kmart purchased air missile toys for the following season from Toy Quest which had been repackaged as the BANZAI Power Launcher Rocket. Declaration of Keith Hobson, ECF No. 78-1 at 3; No. 78-4.

         Plaintiffs filed the present action on November 11, 2014, and amended their Complaint on February 2, 2015, bringing claims of trademark counterfeiting under Section 32 of the Lanham Act, 15 U.S.C. § 1114(1) (Count I), trademark infringement under Section 32 of the Lanham Act, 15 U.S.C. § 1114(1) (Count II), false designation of origin under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1) (Count III), trademark infringement under the Maryland common law (Count IV), unfair trade practices under the Maryland Consumer Protection Act, Md. Code Ann., Comm. Law § 13-101 et seq. (Count V), and unfair competition under Maryland common law (Count VI). See ECF No. 34.

         On February 20, 2015, Defendants filed their Answer to the Amended Complaint and a Counterclaim for cancellation of the “Stomp” and “Stomp Rocket” trademark registrations on the grounds that the marks are generic. ECF No. 41. On June 10, 2016, Plaintiffs moved for summary judgment on Defendants' liability as to all claims. ECF No. 71. And on August 11, 2016, Plaintiffs moved to exclude the expert report and testimony of Peter Magalhaes. ECF No. 82.

         II. DISCUSSION

         A. Plaintiffs' Motion to Exclude the Expert Report and Testimony of Peter Magalhaes

         Defendants named a “toy marketing expert, ” Peter Magalhaes, who intends to testify as to (1) whether the term “Stomp” or “Stomp Rocket” has acquired secondary meaning as a registered trademark in the toy industry; (2) whether the term “Stomp” or “Stomp Rocket” is a generic term; and (3) whether there is confusion between the Plaintiffs' Stomp Rocket and the Banzai Stomp Rocket. Expert Report of Peter Magalhaes, ECF No. 82-3 at 2.

         Plaintiffs urge the Court to exclude this expert opinion pursuant to Rule 702 of the Federal Rules of Evidence for its lack of reliability and relevance. Plaintiffs so urge because Mr. Magalhaes possesses little to no relevant training, education and experience to render an opinion in this area. ECF No. 82-1 at 2. Plaintiffs further question the reliability of Mr. Magalhaes' opinion on two grounds: insufficient methodology and Mr. Magalhaes' role as an interested party in the litigation. ECF No. 82-1 at 2, 3. Finally and in the alternative, Plaintiffs argue that Mr. Magalhaes' testimony is not helpful to the trier of fact because it is phrased in conclusory terms and merely opines on the ultimate legal issue, thereby usurping the fact-finding mission of the jury. ECF No. 82-1 at 5.

         Rule 702 contemplates that the court will evaluate whether the testimony is reliable and will aid the ultimate trier of fact. Westberry v. Gislaved Gummi AB, 178 F.3d 257, 260 (4th Cir. 1999). The proponent of the expert testimony bears the burden of establishing its admissibility by a preponderance of evidence. Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir. 2001). Rule 702 provides:

         A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.

         Fed. R. Evid. 702. Courts have distilled Rule 702's requirements into two crucial inquiries: whether the proposed expert's testimony is relevant and reliable. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999); United States v. Forrest, 429 F.3d 73, 80 (4th Cir. 2005). The trial court must carry out the special gatekeeping obligation of ensuring that expert testimony meets both requirements. Kumho Tire, 526 U.S. at 147.

         1. The Reliability of Mr. Magalhaes' Opinions

         Plaintiffs urge the Court to apply strictly the factors articulated in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993) in reviewing Mr. Magalhaes' opinions. It bears noting, however that Rule 702 does not “create[] a schematism that segregates expertise by type while mapping certain kinds of questions to certain kinds of experts. . . . [But rather] the trial judge must have considerable leeway in deciding in a particular case how to go about determining whether particular expert testimony is reliable.” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 151-52 (1999). Here, Mr. Magalhaes' opinion relies solely on his toy marketing experience generally, “requir[ing] slightly different considerations than other expert witnesses.” First Data Merch. Servs. Corp. v. SecurityMetrics, Inc., No. RDB-12-2568, 2014 WL 6871581, at *5 (D. Md. Dec. 3, 2014).

         The Advisory Committee Notes to Rule 702 confirm that formal scientific or academic training and methodology is not a necessary predicate to testimony as an expert. Rather, experience alone, or in conjunction with “other knowledge, skill, training or education, ” can provide a sufficient foundation for expert testimony. See also Kumho Tire, 526 U.S. at 156 (“[N]o one denies that an expert might draw a conclusion from a set of observations based on extensive and specialized experience.”). “Experiential testimony need not ‘rely on anything like the scientific method.'” Casey v. Geek Squad Subsidiary Best Buy Stores, L.P., 823 F.Supp.2d 334, 345 n.9 (D. Md. 2011) (quoting United States v. Wilson, 484 F.3d 267, 274 (4th Cir. 2007)).

         However, “[i]f the witness is relying solely or primarily on experience, then the witness must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts.” Fed.R.Evid. 702, Advisory Comm. Notes; see also Casey, 823 F.Supp.2d at 345 n.9 (quoting Wilson, 484 F.3d at 274). The gatekeeping role of the Court ensures “that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” Kumho Tire, 526 U.S. at 152.

         A court need not “admit opinion evidence that is connected to existing data only by the ipse dixit of the expert [where there is] simply too great an analytical gap between the data and the opinion proffered.” Pugh v. Louisville Ladder, Inc., 361 F. App'x 448, 454 n.4 (4th Cir. 2010); accord Alevromagiros v. Hechinger Co., 993 F.2d 417, 421 (4th Cir. 1993) (“[W]e are unprepared to agree that ‘it is so if an expert says it is so.'”) (citation omitted). “Expert testimony rooted in subjective belief or unsupported speculation does not suffice.” Zuckerman v. Wal-Mart Stores E., L.P., 611 F. App'x 138, 138 (4th Cir. 2015) (quoting Daubert, 509 U.S. at 590) (internal quotation marks omitted).

         When a party challenges an expert's qualifications, “the test for exclusion is a strict one, and the purported expert must have either satisfactory knowledge, skill, experience, training nor education on the issue for which the opinion is proffered.” Kopf v. Skyrm, 993 F.2d 374, 377 (4th Cir. 1993) (quoting Thomas J. Kline, Inc. v. Lorillard, Inc., 878 F.2d 791, 799 (4th Cir. 1989)). But expertise in one field does not qualify a witness as an expert in other fields. See Shreve v. Sears, Roebuck & Co., 166 F.Supp.2d 378, 392 (D. Md. 2001).

         Mr. Magalhaes intends to opine that the (1) “[t]here is no secondary meaning ascribed to the term stomp rocket;” (2) “there is no likelihood of confusion or likelihood of mistake as to the source of the air missile toy at issue in this case;” and (3) “the term [sic] ‘stomp rocket' and ‘stomp' are generic terms and not associated with any single particular brand.” ECF No. 82-3 at 5. To reach his conclusions, Mr. Magalhaes relies predominantly on the results of undefined internet searches, a photograph of “a large display of Banzai products in a Sears store, ” and a single public statement of Plaintiff Ramirez. ECF No. 82-3 at 2-3.

         First with regard to Mr. Magalhaes' training and qualifications, they are wholly inadequate for those areas of offered expertise in marketing and sales for the air launcher/rocket toy market. Mr. Magalhaes has been “involved in the marketing of toys” generally “for approximately seven years, ” and thus has “interact[ed] with hundreds of persons responsible for purchasing toys ranging from the largest retailers to mom and pop toy stores.” ECF No. 82-3 at 3. But even accepting as true this self-admitted expertise, it is overbroad and devoid of specifics pertinent to the relevant market of air-powered launchers or the use of the marks STOMP or STOMP ROCKET in that same market.

         Notably, the only toy experience Mr. Maghalaes has enjoyed is as General Manager of Acquawood-the very corporation who denied involvement in the “sales” of the rocket toy in question. ECF No. 99-1 at 13-14. Accordingly, no evidence demonstrates that Magalhaes has any experience in the relevant market. Nor has Mr. Magalhaes published any articles nor previously acted as an expert witness in any matters at all, and so cannot point to any experience, training or education in the relevant field. ECF No. 82-3 at 2. Without more, Mr. Magalhaes has failed to establish his bona fides as a marketing and sales expert in this particular toy market.

         In this regard, Defendants' reliance on widely varying precedent highlights Mr. Magalhaes' insufficient qualifications. Defendants' Response in Opposition, ECF No. 86 at 7 (citing Tassin v. Sears, Roebuck & Co., 946 F.Supp. 1241 (M.D. La. 1996) (expert qualified as a design engineer where he held an undergraduate and masters in mechanical engineering, worked in the field for over twenty years, including extensive work on product design, and had evaluated the designs of numerous products in litigation-oriented consulting work); First Tennessee Bank Nat. Ass'n v. Barreto, 268 F.3d 319, 335 (6th Cir. 2001) (qualified expert had forty years of experience in the banking industry); U.S. Diamond & Gold v. Julius Klein Diamonds LLC, 2008 WL 4116090 (S.D. Ohio 2008) (allowing an expert to testify based on his 20 years of experience, published material, and had been retained in over a dozen civil and criminal cases)). See also ECF No. 86 at 11 (citing Sam's Wines & Liquors, Inc. v. Wal-Mart Stores, Inc., No. 92 C 5170, 1994 WL 529331, at *11-12 (N.D. Ill. Sept. 27, 1994) (expert qualified to testify about an alcohol brand's secondary meaning based on forty-five years of experience in the liquor industry, chaired two statewide liquor store associations, chaired a corporation that owned multiple liquor stores, and owned a company that franchised liquor stores); Betterbox Communications Ltd. v. BB Technologies, Inc., 300 F.3d. 325 (3d Cir. 2002) (expert with 20 years in the field of direct marketing, mail-order catalogs and the use of logos and how they are used in the marketplace was permitted to testify)).

         Further, with respect to Mr. Magalhaes' ultimate opinions, Mr. Magalhaes' report does not explain how he arrived at his conclusions (his methodology) or how he “reliably applied” his experience to the facts of this case. Wilson, 484 F.3d at 274; ECF No. 82-3 at 5. Similarly, Mr. Magalhaes' brief description of a hypothetical toy store falls short of reliably applying any alleged expertise in toy marketing in reaching his conclusion about the trademarks. His report, devoid of the hallmarks of admissible expert opinion, lacks “the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152 (1999); accord United States v. Raynor, No. CRIM. 3:13MJ215, 2013 WL 5770529, at *9 (E.D. Va. Oct. 24, 2013) (quoting Zenith Elec. Corp. v. WH-TV Broadcasting Corp., 395 F.3d 416, 419 (7th Cir. 2005)) (“An expert must offer good reason to think that his approach produces an accurate estimate using professional methods.”); Oglesby v. Gen. Motors Corp., 190 F.3d 244, 250 (4th Cir. 1999) (“A reliable expert opinion must be based on scientific, technical, or other specialized knowledge and not on belief or speculation, and inferences must be derived using . . . valid methods.”); Silicon Knights, Inc. v. Epic Games, Inc., No. 5:07-CV-275-D, 2011 WL 6748518, at *7 (E.D. N.C. Dec. 22, 2011) (citing Fed.R.Evid. 702; Wilson, 484 F.3d at 276; Cooper, 259 F.3d at 200) (“In addition to requiring that an expert's methodology be generally reliable, Rule 702 requires an expert to reliably apply his methodology to the facts.”). Mr. Magalhaes, therefore, will not be permitted to offer his unfounded opinions in this case.[3]

         2. The Relevance of Mr. Magalhaes' testimony

         To be relevant, the proposed expert testimony must be helpful to the trier of fact. Westberry v. Gislaved Gummi AB, 178 F.3d 257, 260 (4th Cir. 1999). “[Q]uestions of fact that are committed to the jury are the proper subject of opinion testimony.” United States v. McIver, 470 F.3d 550, 561 (4th Cir. 2006) (citing Fed.R.Evid. 704(a)); see generally Anheuser- Busch, Inc. v. L. & L. Wings, Inc., 962 F.2d 316, 318 (4th Cir. 1992) (likelihood of confusion is an “inherently factual” determination which is “particularly amenable to resolution by a jury.”). By contrast, expert opinions that merely recite “a legal standard and draw[] a legal conclusion by applying law to the facts is generally inadmissible.” McIver, 470 F.3d at 561-62 (citing United States v. Barile, 286 F.3d 749, 760 (4th Cir. 2002)). An expert's testimony is deemed a legal conclusion where “the terms used by the witness have a separate, distinct and specialized meaning in the law different from that in the vernacular.” Id. at 562.The district court's task “is to distinguish [helpful] opinion testimony that embraces an ultimate issue of fact from [unhelpful] opinion testimony that states a legal conclusion.” Barile, 286 F.3d at 760.

         Mr. Magalhaes' opinions almost exclusively opine on the ultimate legal conclusion. “It is my opinion, ” he announces, “that stomp rocket is a generic term that refers to a category of air missile toys” and “not associated with any product or manufacturer.” Further, he opines that “there is no secondary meaning ascribed to the term stomp rocket” and “there is no confusion between the source of the particular air missile toy in this case” ECF No. 82-3 at 3-4.

         These are precisely the legal conclusions reserved for the fact-finder. See U.S. v. Melvin, 508 F. App'x 209 (4th Cir. 2013). Defendants reliance on Solid 21, Inc. v. Hublot of America, 109 F.Supp.3d 1313, 1318-19 (C.D. Cal. 2015), further undermines the admissibility of Magalhaes' opinions in this regard. In Solid 21, the three expert opinions regarding genericness were free of legal conclusions and buttressed by voluminous exhibits, a database developed at the behest of the USPTO, and “an extensive overview of the basis for her opinion . . . with examples of the use of the term in the industry, ” respectively. Solid 21, Inc. v. Hublot of Am., 109 F.Supp.3d 1313, 1318 (C.D. Cal. 2015). Mr. Magalhaes has provided no similar analysis or factual support for his final opinions on legal conclusions which invade fact finder's province.

         As to Magalhaes' opinion on likelihood of confusion, Defendants' attempt to clarify that Magalhaes “will testify on the name recognition of the BANZAI house mark” and “purchasing conditions of consumers, including use of house brands for identical products and the existence of numerous manufacturers of air missile toys.” ECF No. 86 at 11. But Mr. Magalhaes' report provides no basis for even this proffered testimony. As formulated, Mr. Magalhaes' likelihood of confusion opinion amounts to little more than a legal conclusion. See Eghnayem v. Boston Sci. Corp., 57 F.Supp.3d 658, 699 (S.D. W.Va. 2014) (quoting In re Fosamax Prods. Liab. Litig., 645 F.Supp.2d 164, 192 (S.D.N.Y. 2009)) (excluding expert opinion where the report is a narrative review of documents and rife with legal conclusions because “[a]n expert cannot be presented to the jury solely for the purpose of constructing a factual narrative based on the record of evidence.”). And devoid of methodology, the Court cannot even allow Mr. Magalhaes to “offer a more general expert opinion, using terms that do not have a separate, distinct, and specialized meaning in the law.” In re C.R. Bard, Inc., 948 F.Supp.2d 589, 629 (S.D. W.Va. 2013), on reconsideration in part (June 14, 2013). Thus, Mr. Magalhaes' expert opinions must be excluded.[4]

         3. Defendants' Request to Supplement Mr. Magalhaes' Expert Report

         In their Opposition, Defendants claim that they intend to supplement Mr. Magalhaes' expert report by submitting new evidence through Mr. Magalhaes. ECF No. 86 at 7 (“Sears intends to submit, through Magalhaes, additional evidence of genericness”). They also suggest that Mr. Magalhaes will bolster his report with “specific books, websites, and advertisements.” ECF No. 86 at 9.

         Federal Rule of Civil Procedure 26(a)(2)(B) requires that an expert report contain “a complete statement of all opinions the witness will express, ” “the facts or data considered by the witness in forming them, ” and “any exhibits that will be used to summarize or support them.” Fed.R.Civ.P. 26(a)(2)(B)(i)-(iii). Failure to comply with Rule 26 regarding expert disclosure precludes the moving party from seeking to admit the same evidence at trial. Fed.R.Civ.P. 37(c)(1); Wilkins v. Montgomery, 751 F.3d 214, 222 (4th Cir. 2014).

         Rule 37(c)(1), however, provides two narrow exceptions to the general rule of exclusion: “(1) when the failure to disclose is substantially justified, and (2) when the nondisclosure is ‘harmless.'” Wilkins, 751 F.3d at 222 (internal citations and quotation marks omitted). To determine whether these exceptions apply, courts may consider the following factors:

(1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the non-disclosing ...

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