Antitrust Law Daily Wrap Up, RICO—E.D. La.: Renewed claims in ongoing ice confection machine litigation dismissed, (Mar 31, 2014)

By Edward L. Puzzo, J.D.

Renewed claims of RICO violations by an ice confection machinery firm must be dismissed on res judicata grounds, but sanctions against the plaintiff were not appropriate, the federal district court in New Orleans has ruled (Snow Ingredients, Inc. v. SnoWizard, Inc., March 27, 2014, Brown, N.; Snow Ingredients, Inc. v. SnoWizard, Inc., March 28, 2014, Brown, N.).

These orders follow prior orders by this court, dated December 14, 2012, January 30, 2013, February 18, 2013, and March 21, 2014 in ongoing consolidated patent and trademark litigation between manufacturers of shaved ice confection machinery and flavor concentrates.

Revised allegations. Plaintiffs now allege that the conduct of SnoWizard and other defendants was intended to monopolize the snowball confection market, fraudulently obtain patents and trademarks, and unfairly compete against business rivals, in a litigation scheme that violated RICO and the Lanham Act. They alleged that the pattern of racketeering activity differed from previous allegations of racketeering activity because it was based on new transactions and occurrences. SnoWizard responded that the RICO claims were barred by res judicata, as they were identical to those alleged by the same plaintiffs in the closely-related Consolidated Cases. But plaintiffs claimed that res judicata did not apply because only six out of nine plaintiffs in the related case were party to this case, and the allegations are not identical.

The court ruled that SnoWizard’s motion to dismiss could not be granted on res judicata grounds as to two of the defendant parties who were not parties to the earlier action and had interests which were not aligned with the other defendants. However, dismissal was still appropriate on the grounds that plaintiffs failed to plead sufficient facts to support the participation of those defendants in the alleged litigation conspiracy.

The current allegations, the court found, had been previously litigated, based on the same nucleus of operative facts. Thus, res judicata did apply to bar the claims, except as to two of the defendants who were not parties to the prior litigation. The claims against the remaining defendants failed because they did not allege the predicate acts required for RICO violations. The court granted SnoWizard’s motion to dismiss the new allegations, with prejudice.

Sanctions again sought. After their prior motion for sanctions against plaintiff’s counsel was denied, SnoWizard filed a second motion for sanctions. The court again found that the RICO allegations were based on potentially criminal conduct, and in light of their seriousness, the allegations could not be considered frivolous. In addition, the court did not find that the complaint had been filed for an improper purpose or simply to “retaliate,” since it was based on new transactions and occurrences not previously litigated. The court again denied SnoWizard’s motion for sanctions.

The case is Civil Action No. 12-1412.

Attorneys: Mark E. Andrews (Andrews Arts & Sciences Law, LLC) for Snow Ingredients, Inc., Simeon, Inc., Theodore Eisenmann and Van’s Snowballs. Jack Edward Morris (Jack E. Morris, Attorney at Law) for SnoWizard, Inc.

Companies: Snow Ingredients, Inc.; Simeon, Inc.; Van’s Snowballs; SnoWizard, Inc.

Cases: Antitrust RICO StateUnfairTradePractices LouisianaNews