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Top Tobacco, L.P. v. Good Times USA, LLC

United States District Court, N.D. Illinois, Eastern Division

January 30, 2017

TOP TOBACCO, L.P. and REPUBLIC TOBACCO, L.P., Plaintiffs/Counter-Defendants,
v.
GOOD TIMES USA, LLC, Defendant/Counter-Plaintiff.

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr. United States District Judge

         Plaintiffs Top Tobacco, L.P. and Republic Tobacco, L.P. brought this trademark infringement action against Defendant Good Times USA, LLC. Before the Court is Plaintiffs' motion to strike affirmative defenses [13]. For the reasons set forth below, the Court grants in part and denies in part Plaintiffs' motion to strike [13] as follows: Plaintiffs' motion to strike is denied as to the first affirmative defense of laches; Plaintiffs' motion to strike is granted without prejudice as to the second, third, and fourth affirmative defenses of acquiescence, estoppel, and unclean hands. Defendant may file a motion for leave to replace the stricken affirmative defenses if it believes it can overcome the deficiencies identified below. A further status hearing is set on February 22, 2017 2017 at 9:30 a.m.

         I. Background

         Plaintiff Top Tobacco, L.P. distributes and sells a variety of smokers' articles and tobacco-related products. Plaintiff Republic Tobacco, L.P. is Top Tobacco's exclusive distributor. Plaintiffs own a number of trademarks related to their products, including the FOUR ACES mark for use with tobacco and the 4 ACES mark for use with cigarette tubes, which are at issue in these consolidated cases. Plaintiffs use these marks with an image depicting four ace playing cards arranged in a four-of-a-kind playing-card hand. Defendant Good Times USA, LLC also produces, distributes, and sells tobacco and smokers' articles, including cigarillos.

         Plaintiffs first filed suit against Defendant in 2014, [1] alleging that Defendant's use of a 4 KINGS mark in connection with its 4 KINGS cigarillos-depicting four king playing cards arranged in a four-of-a-kind playing card hand-is an unauthorized misappropriation of Plaintiffs' FOUR ACES mark in violation of various trademark-infringement and unfair-competition laws. On December 22, 2014, Defendant answered the complaint, raising seven affirmative defenses and alleging five counterclaims against Plaintiffs. [14-cv-8978, 20.] Plaintiffs moved to strike all seven affirmative defenses and Counterclaim #1. [14-cv-8978, 24.] The Court granted in part and denied in part Plaintiffs' motion to strike. [14-cv-8978, 32.] The Court explained that it would permit Defendant to proceed with Counterclaim #1 only to the extent that Defendant seeks declarations that (1) Plaintiffs' GAMBLER, FOUR ACES, and HIGH CARD marks do not create “a family of related playing card marks, ” and (2) Defendant's use of its 4 KINGS mark does not create a likelihood of confusion, mistake, or deception with Plaintiffs' “family of marks” (collectively, the “family-of-marks claims”). Additionally, the Court granted without prejudice Plaintiffs' motion to strike affirmative defenses #1-5 (laches, waiver, estoppel, acquiescence, and unclean hands) and granted with prejudice Plaintiffs' motion to strike affirmative defenses #6-7 (not actual affirmative defenses).

         On April 13, 2016, Plaintiffs filed a second lawsuit[2] against Defendant, alleging that Defendant's use of a 4 K's mark, which Defendant started using instead of 4 KINGS-while maintaining the same depiction of the four king playing cards-is also an unauthorized misappropriation of Plaintiffs' FOUR ACES mark in violation of various trademark- infringement and unfair-competition laws. [1.] On May 9, 2016, the Court granted the parties' agreed motion to consolidate the two cases. [14-cv-8978, 53; 16-cv-4292, 12.] Defendant filed an answer on May 16, 2016, raising the four affirmative defenses currently at issue: laches, equitable estoppel, acquiescence, and unclean hands. [14-cv-8978, 54.] Currently before the Court is Plaintiffs' motion to strike all four affirmative defenses. [13.]

         II. Legal Standard

         Under Federal Rule of Civil Procedure 12(f) “the court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). Motions to strike are generally disfavored but may be used to expedite a case by “remov[ing] unnecessary clutter.” Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989); see also NewNet Commc'n Techs., LLC v. VI E-Cell Tropical Telecom, Ltd., 2015 WL 1520375, at *3 (N.D. Ill. Mar. 30, 2015) (“But where a defendant's asserted [affirmative defenses] are both legion and mostly frivolous, a motion to strike can aid the parties in resolving the case by removing irrelevant issues from consideration”).

         Affirmative defenses are pleadings and, as such, remain subject to the pleading requirements of the Federal Rules of Civil Procedure. Heller, 883 F.2d at 1294; Shield Techs. Corp. v. Paradigm Positioning, LLC, 2012 WL 4120440, at *10 (N.D. Ill. Sept. 19, 2012) (noting that affirmative defenses must be adequately pled under Rules 8 and 9 and must withstand a Rule 12(b)(6) challenge). Most courts in this district have applied the “plausibility” pleading standard in Twombly and Iqbal to affirmative defenses. See Lincoln Gen. Ins. Co. v. Joseph T. Ryerson & Son, Inc., 2015 WL 3819215, at *2 (N.D. Ill. June 18, 2015); Naylor v. Streamwood Behavioral Health Sys., 2012 WL 5499441, at *7 (N.D. Ill. Nov. 13, 2012) (collecting cases). Thus, an affirmative defense must comply with Rule 8(a) by providing “a short and plain statement” of the nature of the defense. Bobbitt v. Victorian House, Inc., 532 F.Supp. 734, 737 (N.D. Ill. 1982) (citing Fed.R.Civ.P. 8(a)). This is meant to give the plaintiff “fair notice” of what the affirmative defense is and the “grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A pleading that offers ‘labels and conclusions' or a ‘formulaic recitation of the elements * * * will not do.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “Ordinarily, [affirmative] defenses will not be struck if they are sufficient as a matter of law or if they present questions of law or fact.” Heller, 883 F.2d at 1294.

         III. Analysis

         A. Laches

         In raising its first affirmative defenses, Defendant asserts that Plaintiffs' claims are barred by the doctrine of laches because “[u]pon information and belief, Plaintiffs knew and were aware of [Defendant's] use of the 4 K's mark * * * long prior to filing [the complaint in the second lawsuit] and to the deadline to amend the pleadings [in the first lawsuit].” [14-cv-8978, 54, at 15.] In moving to strike, Plaintiffs argue that this affirmative defense is insufficient as a matter of law because Defendant cannot show that Plaintiffs unreasonably delayed in bringing their claims or that Defendant was prejudiced.

         The doctrine of laches is derived from the maxim that those who sleep on their rights lose them. Chattanoga Mfg., Inc. v. Nike, Inc., 301 F.3d 789, 792 (7th Cir. 2002). For laches to apply, the defendant must show that (1) the plaintiff had knowledge of the defendant's use of an allegedly infringing mark, (2) the plaintiff inexcusably delayed in taking action with respect to the defendant's use, and (3) the defendant would be prejudiced by allowing the plaintiff to assert its rights at this time. Id. at 792-93. Actual or constructive notice of the defendant's activities will satisfy the first part of the inquiry. Id. at 793. Further, a trademark owner is “chargeable with information it might have received had due inquiry been made.” Id. (quoting Safeway Stores, Inc. v. Safeway Quality Foods, Inc., 433 F.2d 99, 103 (7th Cir. 1970)) (internal quotation marks omitted).

         Plaintiffs contend that Defendant first disclosed that it had adopted and began using the 4 K's mark for cigarillos on December 10, 2015, about four months before the second lawsuit was filed on April 13, 2016. [14, at 5.] Plaintiffs argue that “[a]t most, [Plaintiffs] waited less than six months from the time the Defendant's use was disclosed to file [their] claim of infringement.” [Id.] Plaintiffs contend that as a matter of law, a few months of delay is not sufficient to constitute laches. Defendant alleges that Plaintiffs have actually been aware of Defendant's use of the 4 K's mark since at least September 14, 2015-seven months prior to the filing of the second lawsuit-and further allege that “it is likely that Plaintiffs' [sic] knew of [Defendant's] use of ...


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