Opinion
08 Civ. 5737 (RMB) (RLE).
March 23, 2009
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On June 26, 2008, Plaintiffs brought this action under the Trademark Act of July 5, 1946, (the "Lanham Act"), as amended, 15 U.S.C. § 1051, et seq., raising claims which included trademark infringement and dilution. (Compl. ¶ 8.) On December 1, 2008, The Honorable Richard M. Berman referred this case to the undersigned for general pretrial management. (Docket No. 12.) Before the Court is Plaintiffs' motion to amend their Complaint to add two causes of action against each of two new defendants, Avi Karadi and Mazal Barninka. (Docket No. 24.) Plaintiffs also assert that Avi Karadi's true and correct name is unclear, and request that the caption of the case be amended to read "Avi Karadi, a/k/a Avraham Karadi, Avi Karadi, Avi Kardi, and Avraham Kardi." For the reasons that follow, Plaintiffs' motion to amend their Complaint is GRANTED, in part, and DENIED, in part.
II. BACKGROUND
Plaintiffs' proposed tenth and eleventh causes of action seek to hold Karadi, as supervisor and sole employee of Defendant ABC Rug Cleaners, Inc. ("ABC Rug Cleaners") and Barninka, as owner and sole officer of ABC Rug Cleaners, personally liable under the Lanham Act for trademark infringement and dilution. (Pls.' Mem. of Law ("Pls.' Mem.") at 1.) Plaintiffs contend that Karadi was the driving force behind the alleged trademark dilution and infringement activity. ( Id. at 4.) At his deposition, Karadi admitted that he "pretty much does everything" concerning the operation of ABC Rug Cleaners. (Aff. of Robert L. Dougherty ("Dougherty Aff."), Ex. A at 13, 15.) Defendants note that Karadi is an immigrant from Israel with a limited understanding of the English language, and that ABC Rug Cleaners has another employee, Ephait Barninka, who helps with answering the telephones. (Defs.' Mem. in Opp'n to Pls.' Mot. to Amend Compl. ("Defs.' Opp'n") at 2.) Karadi testified that customers call his company, ABC Rug Cleaners, confusing it with Plaintiffs; and that despite this, he "absolutely[.] with no doubts" made a decision to continue to use the name. (Dougherty Aff., Ex. A at 113, 114-23, 138.) Plaintiffs also note that it is unclear what Avi Karadi's true and correct name is, because: 1) cancelled checks and withdrawal slips from ABC Rug Cleaners' cheeking aeeounts reflect both "Avi Karadi" and "Avi Kardi"; 2) 2008 W-2 statements reflect "Avraham Karadi"; and 3) the signature card for ABC Rug Cleaners' corporate checking account at TD Bank, NA, reflects "Avraham Kardi." Plantiffs therefore request that, should the Court grant them leave to amend the Complaint to add Karadi, the caption be amended to read "Avi Karadi a/k/a Avraham Karadi, Avi Kardi, and Avraham Kardi." (Reply Aff. of Robert Dougherty ("Dougherty Reply Aff.") ¶¶ 4-9.)Plaintiffs argue that Barninka has directed and ratified the trademark infringement actions of ABC Rug Cleaners since its incorporation in March, 2007. (Pls.' Mem. at 4.) At his deposition, Karadi testified that Barninka is the owner and sole officer of ABC Rug Cleaners. (Dougherty Aff., Ex. A at 12-13.) Defendants agree that Barninka is the sole corporate officer and 100% shareholder of ABC Rug Cleaners, but assert that she is not involved in the daily operations of the company. (Defs.' Opp'n at 3.)
Plaintiffs' proposed thirteenth and fourteenth causes of action seek to hold Karadi and Barninka personally liable based on piercing the corporate veil of ABC Rug Cleaners. Plaintiffs argue that no corporate formalities for ABC Rug Cleaners have been followed; their accompanying affidavit set forth facts supporting this contention. (Pls.' Mem. at 6; Dougherty Aff. at 3-6.) Defendants contend that Plaintiffs have not alleged the factual elements necessary to overcome the presumption against piercing, and submit that the veil-piercing causes of action are futile and prejudicial to Karadi, Barninka, and Defendants. (Defs.' Opp'n at 3.) However, Plaintiffs appear to have abandoned their motion with regard to these causes of action insofar as they note, in their Reply to Defendants' Memorandum in Opposition, that in view of the fact that Karadi and Barninka are personally liable and subject to damages under the Lanham Act, "there is no need for the Court to engage in any piercing of the corporate veil analysis." (Pls.' Reply Mem. of Law at 3.) Therefore, the Court considers only Plaintiffs' proposed additional causes of action against Karadi and Barninka under the Lanham Act. Plaintiffs' motion to add causes of action against Karadi and Barninka under a corporate veil-piercing theory is therefore DENIED.
III. DISCUSSION
A. Legal Standard
Generally, leave of court to amend pleadings should be freely given "when justice so requires." Rule 15(a), FED. R. CIV. P.; Rachman Bag Co. v. Liberty Mut. Ins. Co., 46 F.3d 230 (2d Cir. 1995). However, "[r]easons for a proper denial of leave to amend include undue delay, bad faith, futility of the amendment, and perhaps most important, the resulting prejudice to the opposing party." State Teachers Retirement Board v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981); Dluhos v. Floating and Abandoned Vessel, Known as New York, 162 F.3d 63, 69 (2d Cir. 1998); see Cevasco v. National R.R. Passenger Corp., 04 Civ. 5760 (PAC) (GWG), 2007 WL 4440922, at *3 (S.D.N.Y. Dec. 18, 2007) ( citing Foman v. Davis, 371 U.S. 178, 182 (1962)).1. Undue Delay
Absent a showing of bad faith or undue prejudice, mere delay is insufficient to deny the right to amend a pleading. Fluor, 654 F.2d at 856. Where there is undue delay in filing a motion under Rule 15(a), the movant must provide a satisfactory answer for the delay. Lightfoot v. Union Carbide Corp., 92 Civ. 6411 (HB), 1997 WL 752357, at *2 (S.D.N.Y. Dec. 2, 1997) ( citing Cresswell v. Sullivan Cromwell, 922 F.2d. 60, 72 (2d Cir. 1990)). Additionally, leave to amend may be denied where the moving party knows or should have known the facts upon which the amendment is based, but did not originally plead them. Priestly v. American Airlines, Inc., 89 Civ. 8265 (JMC), 1991 WL 64459, at *1 (S.D.N.Y. Apr. 12, 1991).
In the present case, Plaintiffs' motion to amend the Complaint is timely. The Court is mindful that the Parties are currently scheduled to begin trial on April 7, 2009. The delay in information supporting the motion is not the result of lack of diligence by Plaintiffs. Plaintiffs filed the instant motion three weeks after their deposition of Karadi, during which they learned that he was the driving force behind the alleged infringement activity, and that Barninka was the sole officer and shareholder of ABC Rug Cleaners who ratified the trademark infringement. (Pls.' Reply Mem.) Defendants do not assert otherwise.
2. Futility of Amendments
An amendment to a complaint is futile if a proposed claim could not withstand a motion to dismiss pursuant to Rule 12(b)(6). Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 88 (2d Cir. 2002) ( citing Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991)). Under Rule 12(b)(6) the court "must accept the material facts alleged in the complaint as true," and dismiss a claim only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle him to relief." Staron v. McDonald's Corp., 51 F.3d 353, 355 (2d Cir. 1995) (quotations omitted). "The issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims. Indeed, it may appear on the face of the pleading that a recovery is very remote and unlikely but that is not the test." Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995) (quotations omitted); Branham v. Meachum, 77 F.3d 626, 628 (2d Cir. 1996).
Defendants argue that they have not infringed Plaintiffs' trademark and there can be no liability against them, their owners, or their employees. (Defs.' Opp'n at 10.) They contend that Plaintiffs have not produced any evidence supporting their allegations that either Karnadi or Barninka were the conscious driving force behind the alleged infringement. ( Id. at 10-11.) They further argue that because Karadi is an employee, he cannot be held liable for any alleged infringement, and that because Barninka is not involved in the day to day operations of the corporation, she cannot be held individually liable, either. ( Id. at 11.)
Plaintiffs' proposed amendments to their Complaint are not futile under the Lanham Act. "If an individual actively and knowingly cause[s] the trademark infringement, he is personally responsible. Specifically, a corporate officer who directs, controls, ratifies, participates in, or is the moving force behind the infringing activity, is personally liable for such infringement without regard to piercing the corporate veil." Mattel, Inc. v. Internet Dimensions, Inc., No. 99 Civ. 10066 (HB), 2000 WL 973745, at *9 (S.D.N.Y. July 13, 2000) (quoting Babbit Electronics, Inc. v. Dynascan Corp., 38 F.3d 1161, 1184 (11th Cir. 1994) (emphasis in original). The alleged positions of Karadi and Barninka as sole/managing employee and sole owner/shareholder, respectively, place them in roles that could potentially result in their personal liability for the losses allegedly suffered by Plaintiffs. See Fugazy International Travel Group v. Stargazer Ltd., 02 Civ. 3373 (HB), 2003 WL 115220, at *3 (S.D.N.Y. 2003). Although Defendants deny that either Karadi or Barninka was the conscious driving force behind the alleged infringement, they present no evidence that might show Plaintiffs' allegations false or that these individuals are for some other reason not personally liable for the harm allegedly suffered by Plaintiffs. Because the proposed amendments could withstand a motion to dismiss, they are not futile. Therefore, Plaintiffs' motion to add "Avi Karadi, a/k/a Avraham Karadi, Avi Kardi, and Avraham Kardi" and Mazal Barninka as individual defendants in this case, with a cause of action against each asserting personal liability under the Lanham Act is GRANTED.
3. Prejudice
Where discovery has been closed, subsequent amendment to the pleadings may be prejudicial to the opposing party. Berman v. Parco, 986 F. Supp. 195 (S.D.N.Y. 1996). In determining what constitutes prejudice, the Court considers whether the assertion of the new claim would (1) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (2) significantly delay the resolution of the dispute; or (3) prevent the plaintiff from bringing a timely action in another jurisdiction. Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir. 1993); Duncan v. College of New Rochelle, 174 F.R.D. 48, 49 (S.D.N.Y. 1997). "Although, an amendment to the Complaint will more than likely subject defendant to some additional burden, courts have held that such a burden does not constitute impermissible prejudice." See, e.g., Morse/Diesel, Inc. v. Fidelity and Deposit Co. of Md., 715 F.Supp. 578, 581 (1989); International Bank v. Price Waterhouse and Co., 85 F.R.D. 140, 142 (1980); Tomlinson v. St. Paul Reinsurance Management Corp., 96 Civ. 4760 (JFK), 1998 WL 65996, at *4 (S.D.N.Y. Feb. 17, 1998).
Defendants assert that they will be prejudiced because discovery has closed, and there is not sufficient time to assert discovery demands, comply with them, analyze discovered information, and prepare for trial. (Defs.' Opp'n at 9.) Defendants also argue that if Karadi and Barninka are named individually as defendants, they will need to determine whether they will want Jacobson Colfin, P.C. to represent them. ( Id. at 10.) The Court fails to see how Defendants would be seriously prejudiced by these amendments. Karadi has already been deposed, and there is pending before the Court a dispute between the Parties concerning the location for Barninka's deposition. Defendants point to no specific additional discovery that will require them to expend significant additional resources, impair their ability to prepare for trial, or that will significantly delay the resolution of this case. Moreover, Defendants have not articulated any divergence in interests among ABC Rug Cleaners, Barninka, and Karadi that would necessitate the retention of new counsel for Barninka and Karadi. Therefore, the Court finds that Plaintiffs' proposed additional tenth and eleventh causes of action, alleging personal liability against Karadi and Barninka for infringing activity under the Lanham Act, are not prejudicial to Defendants.
III. CONCLUSION
For the foregoing reasons, Plaintiffs' motion to amend their Complaint is GRANTED with respect to the addition of a tenth and eleventh cause of action against Karadi and Barninka for personal liability under the Lanham Act, and DENIED with respect to the addition of a twelfth and thirteenth cause of action against Karadi and Barninka for personal liability under a theory of corporate veil-piercing.