Decided: March 14, 2013
The Fourth Circuit Court of Appeals reverse the district court’s ruling that vacated a jury verdict in favor of Georgia-Pacific and awarded judgment to Von Drehle based on a preclusion defense. The Court found the district court was in error because Von Drehle waived the preclusion defenses and the district court erred by considering the defenses sua sponte.
The original dispute in this appeal was a contributory trademark infringement case brought by Georgia-Pacific in 2005 involving its automatic paper towel dispensers and the paper towels used in those dispensers. The Fourth Circuit originally heard an appeal from the district court’s granting of summary judgment for Von Drehle. See Georgia-Pacific Consumer Products, LP v. Von Drehle Corp., 618 F.3d 441 (4th Cir. 2010). In August of 2010, The Fourth Circuit remanded the case for a jury determination of whether Von Drehle was liable for contributory copyright infringement. Three months after the Fourth Circuit’s decision, Von Drehle sought to amend its answer to include the affirmative defenses of claim and issue preclusion. These defenses were based on the supposedly preclusive effect of a federal district court in Arkansas’s ruling in favor of a Von Drehle distributor. More than 480 days had elapsed since the Arkansas court’s ruling and Von Drehle’s motion to amend. The district court denied the request to amend, ruling that Von Drehle did not assert the defenses in a timely matter, and that the change was prejudicial to Georgia-Pacific. At trial, the jury issued a verdict in favor of Georgia-Pacific. The district court then ordered a judgment vacating the judgment and awarding judgment in Von Drehle’s favor, based on the preclusive effect of the Arkansas ruling. Georgia-Pacific appealed from that judgment.
The Fourth Circuit ruled that the district court erred in vacating the jury verdict and by applying the preclusive defenses sua sponte. The Court noted that issue and claim preclusion are affirmative defenses that must be plead or they will be waived. Even if the defenses are not available at the outset of litigation, a party can waive them if they wait too long to assert them. Von Drehle did not raise these defenses at the first reasonable opportunity and allowed three significant opportunities conclude before asserting them: the time between the Arkansas decision and the grant of summary judgment, the 12 month period that the 4th Circuit maintained jurisdiction in the original appeal, and the three months from the Court’s decision and Von Drehle’s motion. Also, the district court should not have applied the defenses sua sponte, because this is only allowed in “special circumstances.” One such special circumstance is when a certain defense is not known to a court during trial. Here, this was not the case and Von Drehle did not prove any other special circumstances.
-Jonathan M. Riddle