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Hefter Impact Technologies, LLC v. Sport Maska, Inc.

United States District Court, D. Massachusetts

August 3, 2017

HEFTER IMPACT TECHNOLOGIES, LLC, Plaintiff,
v.
SPORT MASKA, INC., d/b/a REEBOK - CCM HOCKEY, Defendant.

          MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION FOR SANCTIONS FOR SPOLIATION OF EVIDENCE AND DISCOVERY MISCONDUCT

          F. DENNIS SAYLOR IV, United States District Judge

         This is a contract dispute. In 2005, plaintiff Hefter Impact Technologies, LLC, (“HIT”) entered into an agreement with defendant Sport Maska, Inc., d/b/a Reebok - CCM Hockey, for the sale and assignment of a design for an ice-hockey helmet. The agreement provided for a lump-sum payment as well as the payment of royalties on the sale of certain helmets. In substance, the complaint alleges that defendant has failed to pay HIT royalties it is owed under the agreement.

         HIT has filed a motion for sanctions for spoliation of evidence. For the following reasons, the motion will be granted in part and denied in part.

         I. Background

         A. Factual Background

         Unless otherwise noted, the following facts are undisputed.

         1. Parties

         Hefter Impact Technologies, LLC is a limited liability company that designs ice-hockey helmets. (Def. Mot. Summ. J. SMF ¶ 1). Defendant Sport Maska, Inc. is a corporation doing business as Reebok - CCM Hockey (“CCM”) and headquartered in Montreal, Canada. (Answer ¶ 8). CCM sells ice-hockey equipment, including helmets. (Pl. Mot. Summ. J. SMF ¶ 1).

         Around 2003, HIT developed a new design for an ice-hockey helmet that the parties call the “Hefter Shell Design.” (Id. ¶ 1).[1] Dennis Hefter, the founder of HIT, testified that he created the Hefter Shell Design to appear more narrow and angular than existing helmets in order to give it a “faster” look. (Hefter Dep. 106; Pl. Mot. Summ. J. SMF ¶ 2).

         2. Purchase and Assignment Agreement

         On November 15, 2005, CCM and HIT entered into a Purchase and Assignment Agreement under which HIT conveyed the right, title, and interest in the Hefter Shell Design to CCM. (Def. Mot. Summ. J. SMF Ex. 2, Purchase and Assignment Agreement (the “Agreement”)). The Agreement provided for a lump-sum payment of $350, 000 for the assignment of the Hefter Shell Design and for royalties of 4.5% of all net sales of “any Product that incorporates the Shell Design.” (Id. § 3.5). As relevant here, “Product” is defined under the Agreement to mean “a hockey helmet that incorporates the Shell Design.” (Id. § 2.14). “Shell Design, ” in turn, is defined to mean “the design shown in [a schematic attached to the Agreement], including the ornamental design and technical features of the design, or any shell derived therefrom and substantially similar thereto.” (Id. § 2.15).

         a. Helmets Not in Dispute

         After signing the Agreement, CCM developed a new line of hockey helmets called “Vector” based, in part, on the Hefter Shell Design. (Def. Mot. Summ. J. SMF ¶ 5). The line encompassed multiple helmet models with different shell designs. (Martin Dep. 134-35). A CCM employee named Phillipe Martin was responsible designing the Vector line. (Id. at 91- 92). Martin testified that for one set of Vector models, about 30% of the design was based on the Hefter Shell Design. (Id. at 135). For another set of Vector models, less than about 50% was based on the Hefter Design. (Id. at 134).

         CCM viewed the Vector line as a success. (Gibson Dep. 121). By 2012, about a third of National Hockey League players were wearing helmets from that line. (Id.). The parties agree that royalties are payable on the sale of any Vector helmets, and that CCM has paid HIT royalties for the sale of those helmets under the terms of the Agreement. (Def. Mot. Summ. J. SMF ¶ 6).

         b. Helmets in Dispute

         The dispute in this case centers on helmets developed after the Vector line: the Resistance line, the HT11K helmet, and the FitLite line. (Id. ¶ 7).

         Phillippe Martin was also the lead designer on the Resistance line of helmets. (Martin Aff. ¶ 2). The development of that line began around 2010 and was completed in late 2013. (Gibson Aff. ¶ 2). One of CCM's express objectives in developing the Resistance line was to avoid paying HIT royalties on helmet sales. (Gibson Dep. 185-86). Martin testified that although there are some elements in common between the Resistance design and the Hefter Shell Design, including the placement of ventilation holes, those elements were not inspired by the Hefter Shell Design. (Martin Dep. 219). According to Martin, “the outer shell design of the Resistance helmets was not derived from [the Hefter Shell Design] or the design of any other then-existing hockey helmet. Put another way, neither [the Hefter Shell Design] nor the Vector shell designs were reused in the design of the Resistance outer shell.” (Martin Aff. ¶ 3).

         Another helmet designer employed by CCM, Sebastian Morin, was the lead designer on the HT11K helmet and the FitLite line of helmets, which includes the FL40, FL60, FL80, and FitLite 3DS models. (Morin Aff. ¶ 2). Like Martin, Morin contends that the designs of those helmets were not derived from the Hefter Shell Design or any Vector or Resistance helmet. (Id. ¶ 3). He further contends that the HT11K, the FL40, FL60, and FL80 were derived from the shells of a helmet line called the 8K helmet, which had a design completed before November 2005. (Id. ¶ 3). He further contends that he designed the FitLite 3DS helmet model based on feedback he received from NHL star Sidney Crosby as to his preferences in a helmet. (Id. ¶ 4).

         c. Ball Report

         Roger M. Ball, HIT's expert witness, is a professor of industrial design at Georgia Tech University. (Docket No. 110, Ball Report Ex. B). He has more than thirty years of experience in industrial design, including as a designer and design consultant in the hockey industry. (Id.). He holds four United States patents on ice-hockey and snowboard helmets, and has authored articles on the design of protective headgear. (Id.).

         In his expert report, Ball opined that the Hefter Shell Design has a “stealth fighter” look that “represents a significant departure from [CCM's] previous look of rounded, organic shapes.” (Ball Report at 8). That look, he contends, has been maintained in the Resistance line, the HT11K, and the FitLite line. (Id. at 10). Ultimately, he concluded that although the helmets are “not identical, ” the Resistance line, the HT11K, and FitLite line of helmets are “derived from and are substantially similar to” the Hefter Shell Design. (Id. at 23-24).

         3. Alleged Spoliation of Evidence

         On September 22, 2014, HIT sent a letter to CCM demanding royalties for the sale of the Resistance line of helmets and informing CCM that it would take further action, including civil action, if not paid. (Pl. Mot for Sanctions Ex. L). The letter did not mention the HT11K or FitLite line. (Id.).

         When threatened with litigation, CCM's policy is to issue a “litigation-hold memorandum” instructing employees not to destroy relevant information. (Wexelblatt Dep. 39- 40). Keith Wexelblatt is in-house counsel at CCM. (Wexelblatt Aff. ¶ 1). Wexelblatt testified that the memorandum instructs the relevant document custodians not to destroy any information, to put all relevant information to the side, and to not delete any hard-copy or e-mail documents. (Wexelblatt Dep. 39). He also testified that he and other business leaders may issue verbal and written reminders concerning the memorandum as necessary. (Id. at 40).

         After receiving HIT's letter, presumably in September or October 2014, Wexelblatt issued a litigation-hold memorandum to a number of employees involved in the development of the Resistance line. (Wexelblatt Aff. ¶ 4). The memorandum is not a part of the record in this case, as CCM has refused to produce the document based on a claim of privilege. Wexelblatt testified that he believed that the employees to whom the memorandum was issued complied with it by preserving the requested materials. (Wexelblatt Dep. 46-47). He testified that in order to ensure compliance, he spoke with some of the people to whom the memorandum was issued and with the information technology department, but could ...


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