On December 1st, Niwot, CO-based shoe manufacturer Crocs, Inc. (NASDAQ:CROX) filed a motion for sanctions against Las Vegas, NV-based rival firm USA Dawgs Inc., which outlined a series of harassing legal moves in which Dawgs has engaged in recent years. Crocs is asking the District of Nevada to award Crocs costs and attorneys’ fees incurred by a lawsuit which Crocs alleges that Dawgs has pursued in bad faith.
This particular case, one of many which has played out between these two parties in recent years, stems back to a complaint filed by Dawgs in late July. In that complaint, Dawgs accused Crocs of infringing upon Dawgs’ trade dress rights by offering a sandal with a Z-shaped upper portion. While Dawgs alleged that it had sold such sandals since 2007, while Crocs revealed similarly styled sandal models in 2013. Further, Dawgs had accused Crocs and certain of its employees of computer fraud by obtaining what it argued was unauthorized access to sales data collected by the e-commerce platform Zulily. Dawgs alleged that Crocs employees had accessed password-protected data generated by a Zulily flash sales event. Dawgs had its footwear pulled from Zulily’s sales event prior to 2016’s Black Friday shopping holiday after Crocs communicated with Zulily regarding the sale of Dawgs’ molded clog footwear. Dawgs alleged that the removal of footwear products from Zulily’s platform during November 2016 cost it tens of thousands in revenues.
In its motion for sanctions, Crocs notes that Dawgs had sued Crocs three times in the District of Nevada and abandoned two of those suits without prejudice, one after the court ordered that the case be transferred to the District of Colorado where Crocs had previously filed a lawsuit with duplicative claims against Dawgs, the other being maintained by Dawgs for months through a motion to dismiss and a request for a stay of discovery. In this second case, the court found that Dawgs had acted in bad faith by maintaining the suit as a bargaining chip to leverage against Crocs regarding the Colorado case.
Crocs also alleged that Dawgs had made baseless allegations in its July complaint against both Crocs and three current and former employees of the company. Dawgs’ allegations that Crocs had engaged in unauthorized access of sales data on the Zulily platform stem from a letter produced by Zulily during discovery in the Colorado case. Zulily had previously and expressly confirmed that the information accessed by Crocs employees had been obtained lawfully and that “hacking” was not the only way that Crocs could have learned that Dawgs was planning to sell knock-off footwear.
As to the allegations that Crocs had infringed upon Dawgs’ trade dress rights to the Z-shaped sandal top, Crocs argued that documents within Dawgs’ possession before filing suit showed that Crocs had offered a sandal with a Z-shaped top since 2009. Further, Dawgs’ trade dress-related claims are allegedly time-barred and the firm could not plausibly assert a protectable interest in the generic Z-shaped upper sandal portion.
In response to the allegations made by Dawgs in this case, Crocs collected a substantial amount of discovery to disprove the claims made in the case. This included processing more than 500 gigabytes of electronically stored information as well as employee emails, communications with Zulily and sales records dating back to 2008. Counsel for Crocs ended up presenting an initial production of 3,651 pages in response to requests for production made by Dawgs. By contrast, Dawgs produced a total of 64 pages of documentation regarding Dawgs’ communication with Zulily on the sales event, none of which indicated that there was ever any hacking of Dawgs’ password-protected vendor portal on Zulily. The evidence of hacking provided by Dawgs consisted solely of the fact that Dawgs had not given the final sign-off for its planned sales event with Zulily before the infringing products were spotted on the site by Crocs employees, “as if this were proof of anything.”
Then, Crocs alleges that, in a letter dated October 27th of this year, Dawgs CEO Steven Mann notified Crocs that Dawgs had filed lawsuits against more than 20 current and former Crocs employees in multiple jurisdictions. Mann allegedly remarked that “you will soon see a dramatic increase in litigation costs” and that “Dawgs will also be doing everything necessary in the public domain, including launching a media campaign, to make people aware of what has been happening for the past 14 years at the expense of our company.”
Crocs recent motion asks for sanctions to be placed upon Crocs counsel for violating 28 U.S.C. § 1927, which empowers the court to require the attorney or any other person “who so multiplies the proceedings in any case unreasonably and vexatiously” to personally satisfy the excess costs and fees stemming from such conduct. Crocs also makes a motion under Federal Rule of Civil Procedure 11, which also gives the district court power to sanction attorneys or parties who submit pleadings with frivolous arguments or arguments that have no evidentiary support. Crocs is seeking to recover nearly $180,000 in attorneys’ fees, a figured it feels is “conservative,” on its Rule 11 motion with supplementation to follow once the billing schedule for November through Dawgs’ dismissal of the suit is determined. Crocs notes that it will “separately seek to recover costs incurred” by outsourced e-discovery services.
Crocs is also seeking a series of non-monetary sanctions against Dawgs including a public retraction and apology regarding the hacking claims which have impacted the reputations of the individuals involved in the case who have been contacted by members of the press regarding the hacking claims. Crocs alleges that Google searches of the individuals’ names continue to bring up headlines connecting them to Dawgs’ hacking claims. “A public retraction and apology would not erase the hardship inflicted on the individual Defendants, but would at least be a start to helping them put this sordid affair behind them,” Crocs’ motion reads. Crocs also seeks an order that would require Dawgs to get permission from Nevada district court if it were to re-file suit against Crocs in the same district, noting that Dawgs has continued to dismiss suits without prejudice, “purposefully preventing Defendants from clearing their names.”
Dawgs has been a thorn in the side of Crocs not only in district court but also at the U.S. Patent and Trademark Office, where Dawgs was successful in having a Crocs design patent invalidated through inter partes reexamination proceedings this August. On September 8th, Crocs filed a notice of appeal from the examiner’s decision to the Patent Trial and Appeal Board (PTAB).