Proceeding
`Party
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`Correspondence
`Address
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`Submission
`Filer's Name
`Filer's e-mail
`Signature
`Date
`Attachments
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`Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`ESTTA661369
`ESTTA Tracking number:
`03/16/2015
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`Filing date:
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`92058149
`Defendant
`Heckler & Koch GmbH
`DANIEL R COOPER
`COOPER & KURZ
`170 EDEN ROAD
`STAMFORD, CT 06907-1007
`UNITED STATES
`kurzcooper@att.net
`Other Motions/Papers
`Daniel R. Cooper
`kurzcooper@att.net
`/drc/
`03/16/2015
`Submission of Documents -- Order of 12 24 2015.pdf(99491 bytes )
`1-10.pdf(58333 bytes )
`11-20.pdf(64074 bytes )
`21-30.pdf(64344 bytes )
`31-40.pdf(61924 bytes )
`41-50.pdf(64799 bytes )
`51-60.pdf(61729 bytes )
`61-70.pdf(195935 bytes )
`71-80.pdf(56484 bytes )
`81-90.pdf(59349 bytes )
`91-95.pdf(58406 bytes )
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`

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`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
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`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
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`In the Matter of U.S. Trademark Registration No. 3872900 for the mark “MP5”
`Registered: November 9, 2010
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`_______________________________________
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`German Sport Guns GmbH,
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`Petitioner,
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`Heckler & Koch GmbH,
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`Respondent.
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`_______________________________________)
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` Cancellation No. 92058149
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`SUBMISSION OF DOCUMENTS
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`In response to the Board’s Order of March 6, 2015, and as agreed by the parties,
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`Petitioner has submitted the currently operative pleadings in Heckler & Koch, Inc., et. al.
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`v. German Sport Guns GmbH, et. al., Case No. 1:11-CV-01108-SEB-TAB (S.D. Ind.)
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`(“the Federal case”).1
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`However, in addition to the pleadings submitted by Petitioner, Respondent would
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`like to call to the Board’s attention an order that has been issued by the Court in the
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`Federal case, dated December 24, 2014, Docket No. 425 (“the December 24 Order).”
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`Respondent submits that the December 24 Order is dispositive of any issues that may
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`have a bearing on the Board proceeding captioned above. (Though Respondent is of the
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`belief that none of the issues being litigated in the Federal case have a bearing on the
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`Board proceeding.)
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`                                                        
`1 TTABVUE 30 (March 13, 2015). 
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`Respondent respectfully submits a copy of the December 24 Order herewith.
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`DATED: March 16, 2015
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`Respectfully Submitted,
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`HECKLER & KOCH GmbH
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`/s/ Daniel R. Cooper
`By: __________________________
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`Daniel R. Cooper
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`Cooper & Kurz
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`170 Eden Road
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`Stamford, CT 06907
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`Tel. (203) 322-4852
`kurzcooper@att.net
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`Attorney for Respondent
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`CERTIFICATE OF SERVICE
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`Pursuant to 37 C.F.R. § 2.119, the undersigned hereby certifies that a true and correct
`copy of the foregoing “Submission of Documents” was timely served on Petitioner,
`German Sport Guns GmbH, via Federal Express, prepaid, on this, the 16th day of March,
`2015, to the address stated below:
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`Ms. Sarah Hsia
`Mr. Jason Sneed
`SNEED PLLC
`610 Jetton Street, Suite 120-107
`Davidson, NC 28036
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`Respectfully Submitted,
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`/s/ Daniel R. Cooper
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`____________________________
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`Daniel R. Cooper
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`Cooper & Kurz
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`170 Eden Road
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`Stamford, CT 06907
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`Tel. (203) 322-4852
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`Fax (203) 329-7881
`kurzcooper@att.net
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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 1 of 95 PageID #: 6944
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF INDIANA
`INDIANAPOLIS DIVISION
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`HECKLER & KOCH, INC.,
`HECKLER & KOCH GMBH,
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` Plaintiffs,
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` vs.
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`GERMAN SPORT GUNS GMBH,
`AMERICAN TACTICAL IMPORTS, INC.,
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` Defendants.
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`______________________________________
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`AMERICAN TACTICAL IMPORTS, INC.,
`GERMAN SPORT GUNS GMBH,
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` Counter Claimants,
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` vs.
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`HECKLER & KOCH, INC.,
`HECKLER & KOCH GMBH,
`G. WAYNE WEBER, and
`NIELS IHLOFF
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` Counter Defendants.
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` No. 1:11-cv-01108-SEB-TAB
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`ORDER ON PENDING MOTIONS
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`This cause is before the Court on three motions: (1) Defendants’ motion to strike
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`Plaintiffs’ affirmative defenses to counterclaims [Docket No. 282], filed on March 17, 2014; (2)
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`Plaintiffs’ motion for summary judgment [Docket No. 329], filed on July 17, 2014; and (3)
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`Defendants’ motion for summary judgment [Docket No. 331], filed on July 17, 2014. For the
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`reasons set forth below, Defendants’ motion to strike is DENIED as moot, Plaintiffs’ motion for
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`1
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 2 of 95 PageID #: 6945
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`summary judgment is DENIED in part and GRANTED in part, and Defendants’ motion for
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`summary judgment is DENIED in its entirety.
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`Factual and Procedural Background
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`This matter has been pending on our docket for more than three years, and its antecedent
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`disputes stretch back still further. The array of motions to strike, motions to dismiss, and motions
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`for reconsideration filed by the parties have given us occasion to explore aspects of the case’s
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`factual background, but only now do we arrive at the merits of the intellectual property dispute
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`lying at the core of this sprawling body of litigation. While we have summarized the record
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`previously, we endeavor here to outline the undisputed facts, cognizant that the presence of
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`cross-motions for summary judgment will require us to draw varying inferences from them as we
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`address each of those motions in turn.
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`Plaintiffs Heckler & Koch, Inc. (HK USA) and Heckler & Koch GmbH (HKG) are firms
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`engaged in the manufacture and sale of firearms—headquartered, respectively, in the United
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`States and Germany.1 Among products sold under the Heckler & Koch name is the “MP5,” a
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`weapon originally designed as a nine millimeter submachine gun by HKG in the 1960s, and
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`which has since become the basis of a “family” of firearms sharing certain core design features;
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`Heckler & Koch first sold the MP5 in the United States in the 1970s. Docket No. 346-5 (Weber
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`Decl.) at ¶¶ 4, 8; Docket No. 333-5 (HKG “Official History”) at 247–249, 252–264. In 1990, HK
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`USA registered the MP5 as an international class 13 (firearms) trademark with the United States
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`Patent and Trademark Office (“PTO”). Cooper Decl. ¶ 5. HKG registered the MP5 with the
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`German patent office on June 4, 2008. Id. at ¶ 6.
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`1 As the caption indicates, HK USA and HKG are, together with individual corporate officers G. Wayne Weber and
`Niels Ihloff, defendants in the counterclaims asserted by GSG and ATI. For the sake of simplicity, however, we will
`refer to HK USA and HKG collectively throughout this Order, where their individual identities often are not
`relevant to the discussion.
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`2
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 3 of 95 PageID #: 6946
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`Defendants are also engaged in the firearms business: German Sports Guns GmbH
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`(“GSG”) is an arms manufacturer based in Germany, and American Tactical Imports, Inc.
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`(“ATI”) is an arms importer and retailer incorporated and based in New York. Am. Compl. ¶¶ 7–
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`8.2 Two individuals, both executives for the Plaintiff companies, are also parties to this suit:
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`Counterclaim Defendant G. Wayne Weber is the president of HK USA, Docket No. 251 at ¶ 5;
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`and Counter Defendant Niels Ihloff3 is a managing director of HKG and consulted HK USA
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`during the 2009 settlement negotiations. Id. at ¶ 6.
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`A number of the claims and counterclaims in this case are premised on differing
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`interpretations of two parallel series of events that unfolded between 2008 and 2010: first, HK
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`USA’s initial suit against the Defendants (“the 2009 litigation”); and second, HKG’s attempts to
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`obtain a United States trademark registration for the MP5 weapon.
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`HK USA filed suit in the Southern District of Indiana against GSG, ATI, and a third
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`firearms manufacturer, Orion Arms Corporation, on January 13, 2009 alleging trademark
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`infringement, trade dress infringement, and other related claims. See Docket No. 1; Heckler &
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`Koch, Inc. v. German Sports Guns GmbH, et al, Cause No. 1:09-cv-00039. The crux of the 2009
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`litigation was HK USA’s claim that GSG, ATI, and Orion were engaged in the manufacture and
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`sale of a weapon—styled the “GSG-5”—that copied the design of the Heckler & Koch MP5. Id.
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`At the instigation of the parties’ respective executives, the parties engaged in settlement
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`negotiations, and on October 8, 2009 they signed a Settlement Agreement (“the Agreement”)
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`that stipulated to the dismissal of the infringement suit. The Agreement’s preliminary recitals
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`stated that HK USA owned “a federal trademark registration in the mark ‘MP5’ (Reg. No.
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`2 GSG and ATI are both Defendants and Counterclaimants; for simplicity, we refer to them jointly throughout as
`“Defendants.”
`3 Mr. Ihloff’s name is misspelled in some of the parties’ submissions and captions as “Nils Ilhoff.”
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`3
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 4 of 95 PageID #: 6947
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`1594109)” and that it claimed to own “in the United States a proprietary trade dress comprised of
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`the designs of certain elements of the MP5 firearms (the ‘MP5 trade dress’).” Docket No. 45-1 at
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`1. The Agreement also recited that GSG, ATI, and Orion neither admitted that they had infringed
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`HK USA’s rights nor conceded that HK USA even had any such rights:
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`WHEREAS, GSG, ATI, and Orion have filed in said Lawsuit Defendants’ Answer
`and Counterclaim in which they seek a judgment declaring, inter alia, that their
`activities do not infringe, and have not infringed, any intellectual property rights
`of HK or otherwise violate any law, and that HK does not own the trademark,
`trade dress and other intellectual property rights it claims to own.
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`Id. (emphasis added); see also id. at ¶ 9 (“Defendants make no admission of liability for the
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`claims made against them.”). As for the substance of the Agreement itself, the defendant parties
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`agreed to pay HK USA $300,000 in exchange for the dismissal of the suit. Id. at ¶ 1. They also
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`agreed to halt manufacture of the allegedly infringing GSG-5 design, and to cease selling the
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`weapons once a “sell-off” date had passed. Id. at ¶ 2. For its part, HK USA covenanted not to sue
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`GSG or any of its commercial partners in connection with a different weapon design, the “GSG-
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`522” firearm:
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`HK has reviewed the design of the GSG-522 attached hereto as Exhibit “A” (the
`“GSG-522 Firearm”) and covenants not to sue GSG or any of its customers,
`distributors, dealers or importers for its sale in the United States or anywhere in
`the world, provided GSG otherwise complies with this Agreement. This covenant
`extends to airsoft guns in the design of the GSG-522 firearm.
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`Id. at ¶ 5.
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`While the 2009 litigation was pending, ownership of the MP5 registered trademark—
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`together with any accompanying trade dress rights—changed hands between HK USA and HKG.
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`The process began on June 8, 2008, when HKG filed an application for an “international
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`registration under the Madrid Protocol” for the MP5 trademark within the United States,
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`triggering a PTO office action. Cooper Decl. ¶ 7. On September 19 of the same year, the PTO
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`4
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 6 of 95 PageID #: 6949
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`declaration with the PTO, holding itself out as the current owner of the MP5 mark. Docket No.
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`332-15.
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`In May 2010, the PTO informed HKG that the third party’s competing trademark
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`application had been abandoned, advising HKG that it was nonetheless still necessary for HKG’s
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`ownership of the MP5 mark to be established before the company’s application for U.S.
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`registration of the MP5 could be granted. Cooper Decl. ¶ 10. HKG then recorded the Assignment
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`with the PTO on June 20, 2010; this marked Plaintiffs’ first public acknowledgment of the
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`transfer of rights.4 Docket No. 251-2 at 2. The PTO responded by granting HKG’s registration
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`application on November 9, 2010. Cooper Decl. ¶ 10. HKG remains the holder of the registered
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`MP5 trademark. Am. Compl. ¶ 12.
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`Procedural History
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`Plaintiffs contend that Defendants have failed to abide by the Settlement Agreement.
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`Specifically, they allege that Defendants have “repackaged” the GSG-5—a “knock-off” weapon
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`designed to “replicate the look and feel of the famous MP5®”—and sold it under the label of the
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`GSG-522. Am. Compl. ¶ 2. By manufacturing, importing, and selling this GSG-5 in GSG-522’s
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`clothes, Plaintiffs argue, Defendants have both violated their covenant not to sell the GSG-5 and
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`deceptively deviated from the GSG-522 design that they submitted for HK USA’s approval in
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`the Agreement. Id. Plaintiffs also allege that Defendants continued to manufacture and sell the
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`GSG-5 under its own label even after the 2010 “sell-off dates.” Id. at ¶ 3, 27–32. According to
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`Plaintiffs, this conduct directly contravenes Paragraph 3 of the Settlement Agreement.
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`4 Plaintiffs contend that HKG did not “accept” the Assignment until June 15, 2010. Docket NO. 330 at 11, ¶ 26
`(citing Cooper Decl ¶ 10). Plaintiffs’ account relies only on the declaration of HKG’s attorney Isolde Kurz-Cooper,
`and the parties vigorously dispute whether such a delayed acceptance occurred, whether “acceptance” is even
`necessary for an assignment of the type executed by HK USA, and whether such an acceptance has any relevance to
`the parties’ claims and counterclaims. We address some of these contentions below.
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`6
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 7 of 95 PageID #: 6950
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`
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`Bearing these grievances, Plaintiffs again brought suit against GSG and ATI. The original
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`version of this complaint, later removed from Indiana state court to this Court, was brought by
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`HK USA alone, and it contained only a claim for breach of contract. See Docket No. 1. Plaintiffs
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`subsequently sought leave to amend the complaint to add HKG as a plaintiff and to include
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`additional claims for tortious interference and fraud against both Defendants as well as claims of
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`state and federal trade dress infringement, trademark dilution, and unfair competition against
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`GSG alone. Magistrate Judge Baker granted leave to amend, Docket No. 44, and Plaintiffs filed
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`their amended complaint on May 22, 2012. Defendants’ subsequent motion to dismiss the
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`amended complaint [Docket No. 49] was granted in part and denied in part. We dismissed
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`Plaintiffs’ claims for tortious interference with a business relationship, fraud, and common-law
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`“unfair competition,” leaving intact their claims for breach of contract, trademark dilution,
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`statutory and common-law federal trademark infringement, and state-law trademark
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`infringement. Docket No. 214.
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`Defendants have also asserted a number of counterclaims alleging that Plaintiffs wronged
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`them in surreptitiously assigning the MP5 IP rights during the pendency of the 2009 litigation;
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`Defendants also bring counterclaims for breach of the Settlement Agreement and seek
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`declaratory judgments that Plaintiffs lack trade dress rights in the MP5 weapon design and that
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`Defendants are not liable for breach of the 2009 Agreement. The tort counterclaims implicate not
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`only HK USA, but also Weber, Ihloff and HKG. Weber signed the Assignment, and Defendants
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`allege that Counter Defendant Ihloff, as a high-ranking officer of HKG, also knew of it. Docket
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`No. 251 at ¶ 27. Defendants initially alleged that an additional agreement between HK USA and
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`HKG arranged for the transfer of trade dress rights and related goodwill associated with the
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`MP5, but after discovery they have asserted that HK USA and HKG completed the assignment in
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`7
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 8 of 95 PageID #: 6951
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`a single signed agreement. Id. at ¶ 26; Docket No. 251 at ¶ 32(f)(v). On September 20, 2012,
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`Ihloff executed a “Ratification and Consent” in which he, on behalf of HKG, announced that the
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`company “hereby ratifies, affirms, and agrees to be bound in all respects to the Settlement
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`Agreement” reached between HK USA and the Defendants. Docket No. 251 at ¶ 34. According
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`to Defendants’ theory, Ihloff and HKG were aware of the false representations contained in the
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`Settlement Agreement at the time they ratified it. Docket No. 274 at 35–39.
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`The Court subsequently dismissed the actual fraud and constructive fraud claims against
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`Plaintiffs and the two Counter Defendants, and it dismissed the deception and tortious
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`interference claims against Ihloff. Docket No. 215. In its order, the Court primarily addressed
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`Defendants’ failure to establish proximate causation between their alleged damages and the
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`misrepresentations of HK USA and its officers. Id.
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`Defendants took two steps in response to the Court’s partial dismissal of their
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`counterclaims against HK USA, HKG, Weber, and Ihloff. First, on October 30, 2013, they filed a
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`motion for leave to file an amended answer and counterclaims. Docket No. 228. Second, they
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`filed a motion for reconsideration. Docket No. 235. On January 14, 2014, Magistrate Judge
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`Baker granted Defendants’ motion for leave to amend, and they accordingly filed an Amended
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`Answer that restated all of the counterclaims present in their first Answer—including those that
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`had been dismissed by the Court—and added allegations against Ihloff and HK GmbH based on
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`their ratification of the Settlement Agreement. Compare Docket No. 56 with Docket No. 251.
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`We then granted Plaintiffs’ renewed motion to dismiss as to Counterclaim Count II for
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`constructive fraud, but denied the motion as to all other counts. See Docket No. 298. We denied
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`Plaintiffs’ subsequent motion for reconsideration. See Docket No. 383.
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`Legal Analysis
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`8
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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 9 of 95 PageID #: 6952
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`Defendants’ Motion to Strike
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`On March 17, 2014, Defendants filed a motion to strike elements of Plaintiffs’ Answer
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`and affirmative defenses to Defendants’ Amended Counterclaims. Docket No. 282. The pleading
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`that was the subject of this motion, however, has since been replaced by Plaintiffs’ Amended
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`Answer to Defendants’ Amended Counterclaims [Docket No. 304], filed on May 29, 2014.
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`Plaintiffs’ amended answer supersedes their previous answer, and it therefore renders
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`Defendants’ motion to strike moot. See Massey v. Helman, 198 F.3d 727, 735 (7th Cir. 1999);
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`Loren Specialty Mfg. Co. v. Clark Mfg. Co., 241 F. Supp. 493, 500 (N.D. Ill. 1965) (noting that
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`amended answers, like amended complaints, supersede the previous pleading); Horton Archer,
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`LLC v. Farris Bros., Inc., 2014 WL 1239382, at *2 (S.D. Miss. Mar. 26, 2014) (noting that the
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`filing of an amended answer moots a pending motion to strike).
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`We therefore DENY Defendants’ motion to strike without prejudice.
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`Motions for Summary Judgment
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`Standard of Review
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`Federal Rule of Civil Procedure 56 provides that summary judgment should be granted
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`when the record evidence shows that “there is no genuine dispute as to any material fact and the
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`movant is entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(a); Celotex Corp. v.
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`Catrett, 477 U.S. 317, 322–323 (1986). The purpose of summary judgment is to “pierce the
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`pleadings and to assess the proof in order to see whether there is a genuine need for
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`trial.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
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`Disputes concerning material facts are genuine where the evidence is such that a reasonable jury
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`could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
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`248 (1986). In deciding whether genuine issues of material fact exist, the court construes all
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`9
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`

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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 10 of 95 PageID #: 6953
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`facts in a light most favorable to the non-moving party and draws all reasonable inferences in
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`favor of the non-moving party. See id. at 255. However, neither the “mere existence of some
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`alleged factual dispute between the parties,” id., 477 U.S. at 247, nor the existence of “some
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`metaphysical doubt as to the material facts,” Matsushita, 475 U.S. at 586, will defeat a motion
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`for summary judgment. Michas v. Health Cost Controls of Ill., Inc., 209 F.3d 687, 692 (7th Cir.
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`2000).
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`Plaintiffs and Defendants have both filed motions for summary judgment. Plaintiffs seek
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`summary judgment in their favor on Counts I and III through IX of Defendants’ Counterclaims5,
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`while Defendants move for judgment on all of their own counterclaims and all of Plaintiffs’
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`extant claims.6
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`I.
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`Counterclaim Count I – Fraud
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`Count One of the amended counterclaims alleges actual fraud against HK USA, HK
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`GmbH, Weber, and Ihloff.7 To prevail on a fraud claim based on an affirmative
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`misrepresentation, a plaintiff must establish that there was: (1) a material misrepresentation of
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`past or existing fact which (2) was untrue, (3) was made with knowledge of or in reckless
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`ignorance of its falsity, (4) was made with the intent to deceive, (5) was rightfully relied upon by
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`the complaining party, and (6) which proximately caused injury or damage. Lawyers Title Ins.
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`Corp. v. Pokraka, 595 N.E.2d 244, 249 (Ind. 1992); Angel v. Powelson, 977 N.E.2d 434, 444–
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`445 (Ind. Ct. App. 2012).
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`5 The Court has already dismissed Counterclaim Count II, and Plaintiffs do not seek summary judgment as to
`Counterclaims Counts X, XI, and XII.
`6 The Court has already dismissed Counts III, IV, and VIII of Plaintiffs’ Amended Complaint; the surviving claims
`are Counts I, II, V, VI, VII, and IX. Defendants do not frontally challenge Plaintiffs’ two contract claims (Counts I
`and II); rather, they contend in seeking summary judgment on their Counterclaim Count X that any recovery for
`Plaintiffs on those claims is foreclosed by Plaintiffs’ own earlier material breach of the 2009 Agreement. See infra, §
`IX.
`7 Defendants’ initial Answer contained counterclaims alleged fraud against only HK USA and Weber; it is only in
`this new pleading that they have added HK GmbH and Ihloff as Counter Defendants.
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`10
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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 11 of 95 PageID #: 6954
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`Defendants allege that HK USA and its president Weber engaged in fraud when they
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`falsely represented in the 2009 Settlement Agreement that HK USA held the registered
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`trademark and associated rights for the MP5 weapon when, in fact, they had assigned away those
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`rights to HKG some six months earlier.8 Plaintiffs insist that summary judgment be granted on
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`the fraud counterclaim because: (1) there is no proof that Plaintiffs acted with intent to deceive,
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`(2) Defendants cannot prove that they relied on any misrepresentations and that such reliance
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`proximately caused them damages, and (3) the claim is barred as a matter of law by Indiana’s
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`“litigation privilege.” We address Plaintiffs’ new litigation privilege defense first, before
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`considering whether Defendants have set forth facts sufficient to satisfy the legal elements of a
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`fraud claim.
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`A. Litigation Privilege
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`Indiana’s “litigation privilege” is a common-law doctrine barring liability for certain
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`statements made in the course of judicial proceedings. Van Eaton v. Fink, 697 N.E.2d 490, 494
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`(Ind. Ct. App. 1998). The privilege is based on the idea that the “public interest in the freedom of
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`expression by participants in judicial proceedings . . . is so vital and necessary to the integrity of
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`our judicial system that it must be made paramount to the right of the individual to a legal
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`remedy when he has been wronged.” Briggs v. Clinton Cnty. Bank & Trust Co., 452 N.E.2d 989,
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`997 (Ind. Ct. App. 1983). Because it embodies the value of “freedom of expression,” the
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`privilege originally applied only to bar actions for defamation arising out of statements in the
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`course of litigation. See Hartman v. Keri, 883 N.E.2d 774, 777 (Ind. 2008); Miller v. Reinert,
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`839 N.E.2d 731, 735 (Ind. Ct. App. 2005). The Seventh Circuit, however, has recently endorsed
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`8 Defendants also allege that fellow Counterclaim Defendants HKG and Niels Ihloff share liability for the fraud on
`an agency theory through their later ratification of the Agreement. Docket No. 332 at 49–52. Because we ultimately
`grant summary judgment on the fraud claim and other counterclaims in which such agency liability is implicated, we
`do not need to address further this theory.
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`Case 1:11-cv-01108-SEB-TAB Document 425 Filed 12/24/14 Page 12 of 95 PageID #: 6955
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`a limited expansion of Indiana’s privilege “beyond defamation and other similar tort claims to
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`encompass breach of contract claims”; in its 2010 decision in Rain v. Rolls-Royce Corp., 626
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`F.3d 372 (7th Cir. 2010), the court ruled that the privilege barred a breach of contract suit
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`asserting that a party’s statements in the course of litigation violated its obligations under a prior
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`“non-disparagement” covenant. 626 F.3d at 376–378.
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`In reaching this ruling, the Rain court noted that Indiana law was silent on the precise
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`question at hand, and the court therefore “examine[d] the reasoning of courts in other
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`jurisdictions addressing the same issue and applying their own law for whatever guidance about
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`the probable direction of state law they may provide.” Rain, 626 F.3d at 377 (quoting Pisciotta v.
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`Old Nat’l Bancorp, 499 F.3d 629, 635 (7th Cir. 2007)). Plaintiffs urge that we follow that
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`practice here, and they present a series of state court decisions in California, Florida, and New
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`Jersey that extend the litigation privilege to bar actions for fraud (or similar torts) stemming from
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`representations made in the course of judicial proceedings. See Docket No. 330 at 24–27; Silberg
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`v. Anderson, 786 P.2d 365, 370 (Cal. 1990) (noting that the privilege can extend to all actions
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`except malicious prosecution and approving its application to an intentional tort claim arising out
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`of an attorney’s lies about the identity of a witness); Levin, Middlebrooks, Thomas, Mayes &
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`Mitchell, P.A. v. U.S. Fire Ins. Co., 639 So. 2d 606, 607–608 (Fla. 1994) (extending privilege to
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`bar a tortious interference action); Giles v. Phelan, Hallinan & Schmieg, LLP, 901 F. Supp. 2d
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`509, 523–524 (D.N.J. 2012) (applying the privilege in “expansive” fashion to apply to a number
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`of torts).
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`In doing so, however, Plaintiffs ignore a caveat crucial to the Seventh Circuit’s reasoning
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`in Rain—that expansion of the doctrine is appropriate “where immunity from liability is
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`consistent with the purpose of the privilege.” 626 F.3d at 377. Rain and the cases it cited applied
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`the litigation privilege to claims broadly analogous to defamation; in such contexts, concern for
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`the integrity of judicial proceedings—including the protection of statements or disclosures
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`otherwise actionable—was thought to outweigh the interests ordinarily protected by tort or
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`contract law. Id. (citing Ellis v. Kaye-Kibbey, 581 F. Supp. 2d 861, 880–881 (W.D. Mich. 2008);
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`Wentland v. Wass, 25 Cal. Rptr. 3d 109, 114–115 (Cal. Ct. App. 2005) (“[W]hether the litigation
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`privilege applies to an action for breach of contract turns on whether its application furthers the
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`policies underlying the privilege”)). While it is true that Indiana courts have countenanced the
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`limited expansion of the privilege beyond its original scope as a defense to the specific tort of
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`defamation, we are aware of no case in which they have ventured far beyond this core rationale.
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`Cf. Estate of Mayer v. Lax, Inc., 998 N.E.2d 238, 249 (Ind. Ct. App. 2013); Rain, 626 F.3d at 378
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`(“[T]he question [is] whether applying the litigation privilege in this case would promote the due
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`administration of justice and free expression by participants in judicial proceedings.”).
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`Defendants’ counterclaim for fraud alleges that HK USA and its agents lied to GSG and ATI
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`during the 2009 litigation about having assigned away the trademark rights upon which the suit
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`was predicated; we determine that this is not analogous to a suit for defamation or breach of a
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`non-disparagement covenant. See Estate of Mayer, 998 N.E.2d at 250 (noting that the privilege
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`does not shield from causes of action “based on the malicious or abusive use of the judicial
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`system”). Barring suits for fraudulent inducement of settlement agreements would undermine,
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`rather than buttress, the integrity and openness of the judicial process that the litigation privilege
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`seeks to protect. See Tru-Cal v. Conrad Kacsik Instrument Sys., Inc., 905 N.E.2d 40, 46 (Ind. Ct.
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`App. 2009) (recognizing a cause of action for fraudulent misrepresentation in procuring a
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`settlement of litigation). Accordingly, we decline to anticipate or predict that Indiana courts
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`would construct the privilege so expansively. Defendants’ fraud counterclaim may thus stand or
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`fall on its merits.
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`B. Material Misrepresentation and Intent to Deceive
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`The first broad prerequisite for fraud liability is the existence of an intentionally
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`deceptive written statement. In order to give rise to liability, Plaintiffs’ alleged statements in the
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`Settlement Agreement must have been “(1) material misrepresentation[s] of past or existing fact
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`which (2) w[ere] untrue, (3) w[ere] made with knowledge of or in reckless ignorance of [their]
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`falsity, [and] (4) [were] made with the intent to deceive.” Lawyers Title Ins. Corp. v. Pokraka,
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`595 N.E.2d 244, 249 (Ind. 1992). Defendants take issue with this formulation of the fraud
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`standard, insisting that a misrepresentation may be actionable if the responsible party knowingly
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`caused another to rely on it, even if it was not made with an “intent to deceive.” Docket No. 349
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`at 28–29. In support of this—ostensibly—alternative interpretation of the governing Indiana law,
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`Defendants cite Rosenbaum v. Seybold, 2011 WL 3843946 (N.D. Ind. Aug. 30, 2011), which did
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`indeed recite a different formula. The court there stated that a misrepresentation can serve as the
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`basis for fraud liability where it “was made with knowledge of or in reckless ignorance of its
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`falsity . . . [and] was made with the intent to deceive or induce the plaintiff to act.” Rosenbaum,
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`2011 WL 3843946, at *16 (emphasis added).
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`The distinction, however, is illusory. As the Indiana courts have explained, the concept of
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`intentionality is inseparable from the tort of fraud. “An intent to deceive, or ‘scienter,’ is an
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`element of actual fraud, whether classified as a knowing or reckless misrepresentation or as an
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`additional element to a knowing or reckless misrepresentation.” Wright v. Pennamped, 657
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`N.E.2d 1223, 1230 (Ind. Ct. App. 1995). See also Francis v. AIT Labs., 2008 WL 4585423, at *5
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`(S.D. Ind. Oct. 14, 2008). A tortfeasor’s state of mind, of course, can seldom be proved directly;
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`evidence that a defendant knew, or should have known, that a representation would induce
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`reliance is one of several factors that may be probative of scienter. “Proof of intent to deceive is
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`determined by a review of all of the