CNA Financial Corporation v. Brown , 162 F.3d 1334 ( 1998 )

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FILED
U.S. COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ELEVENTH CIRCUIT
12/22/98
THOMAS K. KAHN
CLERK
No. 96-3119
D. C. Docket No. 94-1058-CIV-T-17A
CNA FINANCIAL CORPORATION,
Plaintiff-Appellant-Cross-Appellee,
versus
LARRY D. BROWN, and CNA INSURANCE
COMPANIES, INC.,
Defendants-Appellees-Cross-Appellants.
Appeals from the United States District Court
for the Middle District of Florida
(Dccember 22, 1998)
Before HATCHETT, Chief Judge, TJOFLAT and COX, Circuit Judges.
TJOFLAT, Circuit Judge:
Appellant CNA Financial Corporation (CNAF) is the parent holding corporation of
Continental Casualty Company (Continental), which in turn owns a variety of insurance
companies throughout the United States. These companies – which include the National Fire
Insurance Company of Hartford, the Transcontinental Insurance Company, and the Valley Forge
Life Insurance Company – are collectively known in advertising as the “CNA Insurance
Companies.”
Continental registered the service mark “CNA” in 1966 with the United States Patent and
Trademark Office for use in underwriting a variety of forms of insurance. The mark was
assigned in 1973 to CNAF; three years later CNAF registered the additional service mark
“Insurance From CNA.”
Appellee Larry Brown, in the early 1990s, did some research and discovered that there
was no entity called “CNA Insurance Company” or “CNA Insurance Companies” registered with
any state insurance department in the country. After conducting this research, Brown, in
February 1994, incorporated “CNA Insurance Companies” (CIC) in Delaware and registered
“CNA Insurance Company” as the corporation’s trade name. Two weeks after the incorporation,
Brown’s attorney sent a letter to Continental, stating that Brown owned the name “CNA
Insurance Company” and that Continental must cease using the term. In response, CNAF filed
suit in the United States District Court for the Middle District of Florida seeking to enjoin Brown
and CIC from using the term “CNA.” The suit was based on section 43(a) of the Lanham Act,
15 U.S.C. § 1125(a) (1994), and on a common law claim of unfair competition.
2
The case was referred to court-annexed arbitration pursuant to 28 U.S.C. § 651(a) and the
corresponding local rule.1 CIC, having lost the arbitration, filed a demand for trial de novo, and
the case was reinstated to the district court’s trial docket. After a bench trial, the district court
denied injunctive relief. The district court found that Brown and CIC had not used the term
“CNA” in connection with their services, which is a necessary element of a Lanham Act or
unfair competition claim. See 15 U.S.C. § 1125(a)(1) (1994); CNA Fin. Corp. v. Brown, 922
F.Supp. 567, 573, 575 (M.D. Fla. 1996). Specifically, as of the time of trial, CIC had not offered
any services – CIC’s entire corporate history consisted of incorporating, registering a trade
name, and writing a letter to the Continental Insurance Company. In addition, the district court
found that CNAF had allowed its insurance subsidiaries the uncontrolled use of the CNA service
mark, thereby abandoning its right to use the service mark. See id. at 574. CNAF appeals.
I.
CNAF’s initial challenge to the district court’s decision is that CIC’s demand following
the arbitration for a trial de novo was untimely; therefore the district court abused its discretion
in denying CNAF’s motion for final judgment. Federal law states that an arbitration award in a
court-annexed arbitration becomes the judgment of the court if a trial de novo is not requested
within 30 days of the filing of the award. See 28 U.S.C. §§ 654(a), 655(a) (1994). In this case,
the arbitration award was filed on July 27, 1995, and CIC made a demand for trial de novo on
August 30, 1995 – a space of 34 days. CNAF subsequently filed a motion for final judgment;
1
Section 651(a) authorizes certain United States district courts, including the Middle
District of Florida, see 28 U.S.C. § 658 (1994), to adopt local rules allowing the court to refer
any civil action to arbitration.
3
the district court held that CNAF was not prejudiced by the procedural errors and that “the ends
of justice” therefore required denial of the motion.
The initial question with which we are faced is whether the district court had the power to
hear the case after the expiration of the 30-day period. Time limits on causes of action in federal
statutes are presumed to be subject to extension on equitable grounds – in other words, if “the
ends of justice” so require – unless Congress specifically states otherwise. See Ellis v. General
Motors Acceptance Corp., __ F.3d __ (11th Cir. 1998) [slip op. 97-6963, Nov. 13, 1998].
Looking at 28 U.S.C. § 654, there is no reason to that Congress intended strict application of the
30-day time limit, especially in light of the experimental nature of court-annexed arbitration.
See 28 U.S.C.A. § 651 practice commentary (West 1993) (“Far from requiring conformity,
freeing each participating district to adopt its own rules will prompt their adoption of different
requirements and add value to the experimental nature of the project.”). Furthermore, we have
previously treated the district court’s decision whether to hear a case after the expiration of the
30-day period in 28 U.S.C. § 654 as a matter of discretion. See Cheney v. Anchor Glass
Container Corp., 71 F.3d 848, 850 (11th Cir. 1996). We therefore conclude that the district court
was not divested of jurisdiction after the expiration of the 30-day period.
Having determined that the district court had the power to hear the case, we must now
determine whether the district court’s decision to hear the case constituted an abuse of discretion.
The factors to be considered in this inquiry are the danger of prejudice, the length of the delay in
demanding a new trial, the reason for the delay (including whether it was within the reasonable
4
control of the movant), and whether the delaying parties acted in good faith. See id. at 850.2 In
this case, there was clearly no prejudice to CNAF, a delay of only two days, and no evidence that
Brown or CIC acted in bad faith. The district court made no findings regarding the reason for
the delay, but the record suggests that the delay may have resulted from the clerk of court’s
erroneous record notation that any demand for trial de novo was not due until September 5,
1995. We therefore conclude that the district court did not abuse its discretion in excusing CIC’s
two-day delay and thus denying CNAF’s motion for final judgment.3
II.
We also conclude that the district court did not abuse its discretion in denying CNAF an
injunction. The grant of equitable relief, such as an injunction, is a matter of judicial discretion.
See Eccles v. Peoples Bank of Lakewood Village Cal., 333 U.S. 426, 431, 68 S.Ct. 641, 644, 92
L.Ed. 784 (1948); Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 549 (5th Cir. 1998). Where
2
Cheney involved a district court that had entered a final judgment on the basis of a
party’s failure to demand a trial de novo within 30 days of the filing of an arbitration award; the
district court then denied the delaying party’s motion to set aside the judgment under Federal
Rule of Civil Procedure 60(b). See Cheney, 71 F.3d at 849. This case, in contrast, is an appeal
from a denial of a motion for final judgment. Although the procedural posture of the Cheney
case and this one are therefore different, the scope of the district court’s discretion regarding the
effect of a delay in filing a demand for a trial de novo should be the same regardless of whether
the delay was excused or unexcused. We therefore apply the Cheney standard to this case.
3
CNAF also points out that Brown never filed a demand for a trial de novo, and therefore
the arbitration should at least be binding as to him. The statute, however, states that “[u]pon a
demand for a trial de novo, the action shall be restored to the docket of the court and treated for
all purposes as if it had not been referred to arbitration.” 28 U.S.C. § 655(b) (1994) (emphasis
added). This language implies that all parties to the arbitration are treated as if the arbitration
never occurred; thus, once CIC filed a demand for a trial de novo, Brown was relieved of the
obligation to file such a demand.
5
the need for equitable relief is remote or speculative, it is well within the discretion of the court
to determine that such relief is inappropriate. See Eccles, 333 U.S. at 431, 68 S.Ct. at 644; 11A
Charles Alan Wright et al., Federal Practice and Procedure § 2942, at 45-47 (2d ed. 1995). In
this case, it is uncertain whether Brown or CIC will ever use the CNA name to sell insurance
products or related services. Should they do so, equitable relief for CNAF may well be required.
At this stage, however, we find no abuse of discretion in the district court’s holding that “it
cannot, in equity, grant an injunction against parties that have not performed any services.”
Brown, 922 F. Supp. at 576. We therefore affirm the district court’s denial of equitable relief,
without expressing any views as to the merits of CNAF’s Lanham Act and unfair competition
claims.4
III.
Finally, CNAF challenges the district court’s assessment of Rule 11 sanctions against it.
Rule 11 requires, inter alia, that an attorney’s factual allegations “have evidentiary support or . . .
are likely to have evidentiary support after a reasonable opportunity for further investigation or
4
In addition to CNAF’s claims, Brown made a request (in essence, a counter-claim) in
his opening statement at trial for cancellation of CNAF’s service marks pursuant to 15 U.S.C. §
1119. The district court rejected this request, apparently on the ground that the issue was not
appropriately presented to the court. See Brown, 922 F. Supp. at 576 (describing Brown’s
request as “cursory”). We treat the district court’s decision as a denial of leave to amend the
pleadings, a decision which we review for an abuse of discretion. See Rosen v. TRW, Inc., 979
F.2d 191, 194 (11th Cir. 1992). In light of the untimely nature of Brown’s request, and the
possible prejudice to CNAF of introducing a counter-claim for the first time at trial, we find no
such abuse here.
6
discovery.” Fed. R. Civ. P. 11(b)(3). CNAF, in a post-trial motion for reconsideration,5 stated
that Brown offered (as part of a settlement offer) to sell the use of “CNA Insurance Company”
and “CNA Insurance Companies” to CNAF for the modest sum of $2.5 million. CNAF argued
that such an offer constituted the provision of services under the CNA name, and therefore the
district court should reconsider its finding that Brown and CIC had not offered any services. The
district court reasoned that CNAF’s allegations could not have “evidentiary support,” because
they related to events occurring after the close of the evidence. Therefore, the allegations were
proper only if they were “likely to have evidentiary support” if CNAF were allowed to reopen its
case. The district court noted that settlement offers are generally inadmissible under Federal
Rule of Evidence 408, and that, in light of its conclusion that “services” (as used in the Lanham
Act) does not include offering to sell the use of a service mark, the allegations would also be
irrelevant and thus inadmissible under Federal Rule of Evidence 402. See CNA Fin. Corp. v.
Brown, 930 F. Supp. 1502, 1509 (M.D. Fla. 1996). The district court therefore concluded that
the allegations were not likely to have evidentiary support, and imposed Rule 11 sanctions.6
We review a district court’s Rule 11 determinations for an abuse of discretion. See
Souran v. Travelers Ins. Co., 982 F.2d 1497, 1506 (11th Cir. 1993). We hold that the district
court abused its discretion in this case. Rule 408 of the Federal Rules of Evidence forbids the
introduction of settlement offers to prove or disprove liability; however, it explicitly permits the
5
The motion was “to amend judgment or, in the alternative, to open the judgment and
take additional testimony, or, in the alternative, for a new trial.” See Fed. R. Civ. P. 52(b), 59.
6
The sanctions did not involve a monetary penalty, only a “public reprimand.” Brown,
930 F. Supp. at 1509.
7
introduction of such offers for other purposes. See Fed. R. Evid. 408.7 In this case, the
settlement offer would have been introduced to prove that Brown and CIC were engaging in the
provision of services, not as an admission of liability. As for the district court’s conclusion that
such evidence was irrelevant under Rule 402, such a conclusion was not clear from the district
court’s findings of fact and conclusions of law. In fact, the findings of fact and conclusions of
law expressly stated that “Brown has not made any specific offers to sell the use of the terms
‘CNA,’ ‘CNA Insurance Company,’ or ‘CNA Insurance Companies’ to any third parties,”
suggesting that evidence to the contrary might influence the district court’s decision. Brown,
922 F. Supp. at 572. In addition, the findings of fact and conclusions of law did not say that the
term “services” as used in the Lanham Act does not include the sale of a service mark. CNAF
consequently had no reason to think that evidence of Brown’s offer to sell the “CNA” names
would be inadmissible, and Rule 11 sanctions were therefore inappropriate.
IV.
For the foregoing reasons, the district court’s grant of Brown’s motion for Rule 11
sanctions is REVERSED. In all other respects, the judgment of the district court is AFFIRMED.
SO ORDERED.
7
Rule 408 states, in relevant part, “Evidence of [a settlement offer] is not admissible to
prove liability for or invalidity of the claim or its amount. . . . This rule . . . does not require
exclusion when the evidence is offered for another purpose . . . .” Fed. R. Evid. 408.
8