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

United States Court of Appeals,
Eleventh Circuit.
No. 96-3119.
CNA FINANCIAL CORPORATION, Plaintiff-Appellant-Cross-Appellee,
v.
Larry D. BROWN, and CNA Insurance Companies, Inc., Defendants-Appellees-Cross-
Appellants.
Dec. 22, 1998.
Appeals from the United States District Court for the Middle District of Florida. (No. 94-1058-Civ-
T-17A), Elizabeth A. Kovachevich, Judge.
Before HATCHETT, Chief Judge, and 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.
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.
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.
2
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; 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., 160 F.3d 703 (11th Cir.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
3
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
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
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.
4
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 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
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.
5
likely to have evidentiary support after a reasonable opportunity for further investigation or
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 introduction of
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.
6
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.
7