Commercial Litigation and Arbitration

Hearsay: Importance of Specificity to 803(3) (State of Mind) Foundation — Settlement Negotiations: Rule 408 Doesn’t Bar Evidence Party Acknowledged a Fact at Settlement Meeting That It Now Denies

Fabick, Inc. v. Fabco Equip., Inc., 2017 U.S. Dist. LEXIS 198963 (wdwis Dec. 4, 2017):

This case is set for a jury trial commencing, December 11, 2017, to resolve plaintiff Fabick, Inc.'s remaining claims of trademark infringement against defendants FABCO Equipment, Inc., and JFTCO, Inc. In advance of the final pretrial conference scheduled for December 6, the court issues the following opinion and order on the parties' respective motions in limine. As described below, the parties rehash a number of arguments presented and considered at summary judgment, some of which were raised expressly to avoid waiver. Nonetheless, the court will address each motion in turn.


E. MIL No. 5: Preclude Hearsay Evidence of Actual Confusion (dkt. #232)

In its opinion and order on summary judgment, the court also considered plaintiff's evidence of actual confusion -- namely, plaintiff's employees' log, of sorts, of mistaken calls, visits and mail -- on the basis that the evidence fell within an exception to hearsay under Federal Rule of Evidence 803(3). (11/8/17 Op. & Order (dkt. #221) 47.) In this [*25]  motion in limine, defendants argue that the ruling was in error and ask the court to reconsider it, citing cases where courts excluded this evidence, including the Seventh Circuit decision in Smith Fiberglass Prods., Inc. v. Ameron, Inc., 7 F.3d 1327 (7th Cir. 1993).

The cases cited by defendants, however, are either distinguishable from plaintiff's evidence because it was offered to prove an existing mental state or represents the minority view, which this court does not embrace, particularly because of the Seventh Circuit's Smith decision. See 4 J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 23.15 (contrasting the "minority" view, barring employee testimony that there was confusion as hearsay, in contrast with the "majority" view, admitting this testimony; specifically citing Duluth News-Tribune v. Mesabi Pub. Co., 84 F.3d 1093, 1098 (8th Cir. 1996), as illustrative of minority view).

In Smith, the Seventh Circuit affirmed a district court's finding of no evidence of actual confusion, and more specifically, disregarding an employee's testimony that "at an Air Force trade show, 'a gentleman came in the booth and picked up my sample and said something like, have you been over to Ameron's booth, you're not making that pipe [for them] are you? It looks just like a Smith product.'" Id. at 1330-31 (emphasis in original). Even so, the Seventh [*26]  Circuit expressly considered whether this testimony fell within the 803(3) exception for existing mental condition, only concluding that it did not because: (1) "the identity of the declarant was unknown" and (2) the witness paraphrased the declarant's alleged statement in vague terms. Id. at 1331 n.2; see also Ponemman v. Nike,Inc., 161 F.3d 619, 630 (N.D. Ill. 2016) (excluding tweets because plaintiff admitted that "these statements were not indicative of actual confusion," among other reasons); Bobak Sausage Co. v. A & J Seven Bridges, Inc., 805 F. Supp. 2d 503, 520 (N.D. Ill. 2011) (excluding accounts of confusion by "unknown" and "unidentified" consumers as hearsay, and for other independent reasons). Patterson v. World Wresting Entm't, Inc., No. 03-C-0374, 2006 WL 273527, at *22 (E.D. Wis. Jan. 31, 2006) (excluding witness's "report of what the unidentified person told him" as inadmissible hearsay evidence).

In contrast, the Fabick employees' declarations dealing with alleged consumer confusion are much more detailed, identifying the declarant and providing the actual exchange between the witness and third-party declarant. As a general proposition, therefore, the court finds this testimony falls within the 803(3) exception, consistent with its summary judgment opinion. Of course, defendants remain free to challenge specific evidence of actual confusion where the caller or visitor is not adequately identified, or what was said is not sufficiently [*27]  precise.

Accordingly, defendants' MIL No. 5 is DENIED, without prejudice to defendants objecting to specific testimony. Furthermore, the court will take up defendants' request to impose restrictions on how this evidence may be used at the final pretrial conference.


K. MIL No. 11: Exclude Testimony and Evidence Regarding Statements Made During Settlement Negotiations (dkt. #238)

Next, defendants seek to exclude testimony and other evidence concerning conversations between plaintiff's general counsel Elizabeth Fabick, JFTCO's Vice President of Marketing Tom Svetnicka and JFTCO's Senior Vice President Scott Borlinghaus in late

2015 and early 2016 on the basis that these discussions involved possible settlement of 25

the trademark infringement claims raised in [*36]  this lawsuit and are, therefore, barred under Federal Rule of Evidence 408.

Plaintiff opposes the motion for two, independent reasons. First, plaintiff argues that the discussions pre-date any contemplated litigation and, therefore, do not constitute

"compromise offers or negotiations." (Pl.'s Opp'n (dkt. #288) 36.) Second, and somewhat more persuasive, plaintiff contends that the evidence is admissible under subsection 408(b)'s exception allowing admission of evidence of settlement offered "for another purpose, such as proving a witness's bias or prejudice, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution." Fed. R. Evid. 408(b). Here, plaintiff argues the evidence of what was said before litigation is relevant, "rebuttal evidence in establishing that Defendants had knowledge of Fabick's prior use of the mark, as well as the continued existence and activity of Fabick under that name." (Id. at 37.)

Here, the court agrees with plaintiff that the content of those discussions arguably does not fall within Rule 408, but, regardless, plaintiff seeks to admit it for a permissible reason under that rule. As such, this motion is RESERVED subject to plaintiff providing a formal proffer of the evidence [*37]  that plaintiff will seek to introduce.

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