Opinion
Civil Action No. 03-5046.
September 9, 2004
Memorandum and Order
What began as a basic declaratory judgment action under the Lanham Act has escalated into a vindictive battle in which each party attempts to out-plead the other. After filing a complaint and an amended complaint — which were met with a set of counterclaims, amended counterclaims, and second amended counterclaims — plaintiff Capp, Inc. ("Capp") now seeks leave to file a second amended complaint. Almost a year after initially filing this lawsuit and just four weeks before the close of an extended discovery period, Capp proposes to add four new claims to this action which would altogether alter the nature of what was, at one time, a simple trademark dispute. Because the addition of these new claims would cause unnecessary delay, significant additional discovery, and undue prejudice to the defendant, plaintiff's motion will be denied.
Background
The facts giving rise to this lawsuit are familiar to the court and the parties, and need not be repeated at length here. Plaintiff Capp brought this action against defendant Dickson/Unigage, Inc. ("Dickson"), seeking two declaratory judgments under the Lanham Act, 15 U.S.C. § 1051 et seq.: first, that its "private labeling" of Dickson's SL4 temperature recorders did not violate the Act, and second, that its marketing and distribution of the "Capp Recorder" is permissible under the Act. Capp also seeks damages for Dickson's alleged trade disparagement. Dickson, in response, asserted counterclaims against Capp for trademark infringement, trade dress infringement, and reverse passing off of services and products in violation of the Lanham Act, in addition to several state law claims.
For a brief discussion of the facts, see Capp, Inc. v. Dickson/Unigage, Inc., 2004 WL 339672 (E.D. Pa. Feb. 19, 2004) and Capp, Inc. v. Dickson/Unigage, Inc., 2004 WL 1849893 (E.D. Pa. Aug. 18, 2004).
The facts underlying Capp's original claims and Dickson's counterclaims are fairly narrow. For approximately two decades, plaintiff served as a supplier and distributor of Dickson-manufactured process instrumentation controls and temperature chart recorders, devices used to monitor and maintain the temperature in vaccine storage units. Defendant provided the product — in this case, the "SL4 Recorder" — to plaintiff, and plaintiff supplied the recorders to customers with which it had contracted. In many instances, Capp's customers were state departments of health.
As part of its distribution practice, plaintiff engaged in "private labeling," a process by which it placed its own trademark and identifying information on Dickson recorders before shipping them to its customers. According to Capp, private labeling is a common practice and was approved by Dickson. Dickson, conversely, believes that Capp's private labeling was undertaken in violation of the Lanham Act. This dispute forms the first basis for Capp's declaratory judgment request.
The second legal issue as to which Capp has moved for a declaratory judgment involves its marketing of the "Capp Recorder." After the parties ceased to do business with one another, Capp began marketing a competitor product to the Dickson SL4 Recorder. Dickson claims that the Capp Recorder was designed to look identical to its SL4 Recorder, and has asserted trademark infringement counterclaims to this effect.
In addition to claims arising from this trademark dispute, each party has asserted claims stemming from the series of allegedly disparaging letters, phone calls, and promotional material sent in connection with the competition between the Capp Recorder and the SL4 Recorder.
In 2000, the Center for Disease Control ("CDC") — as part of its Vaccines for Children, or VFC, Program — issued guidelines regarding the handling and storage of vaccines. See Pl.'s 2d Am. Compl. ¶ 13 (attached to Doc. #50 as Ex.1). The temperature chart recording devices at issue in this litigation are used to ensure that vaccines are stored within a certain temperature range, in accordance with these guidelines. References in this memorandum to the "VFC Program submarket," therefore, refer to the market for devices developed in response to — or used to comply with — the CDC guidelines promulgated as part of the VFC Program.
Plaintiff filed its complaint on September 8, 2003 and its amended complaint on November 5, 2003. The court then issued a scheduling order on November 25, 2003 which gave the parties an extremely long period of time to complete discovery — August 12, 2004 (a date which was later extended by agreement of the parties to August 26, 2004).
On July 23, 2004, ten months into discovery and just one month prior to the end of discovery, plaintiff filed this motion for leave to file its 179 paragraph second amended complaint. Briefing on the motion was not completed until plaintiff's correspondence of September 1, 2004, after the close of discovery.
In Capp's proposed second amended complaint it asserts four new claims which stem from an entirely new set of facts. First, Capp seeks to bring a claim for attempted monopolization of trade in violation of the Sherman Act. Capp contends that Dickson has engaged in anticompetitive behavior in the VFC Program submarket by intimidating both state departments of health and chart recorder manufacturers into restricting their sales to exclude Capp. According to Capp, Dickson has attempted — by means of threats, intimidation, and persuasion — to ensure that its temperature chart recorder is the sole product on the market.
In its second new claim, Capp seeks to bring a cause of action against Dickson for entering into contracts in restraint of trade in violation of 15 U.S.C. § 1. According to Capp, the settlement agreements reached between Dickson and Abacus, the former manufacturer of the Capp Recorder, and Dickson and Pentagraph, the former supplier of the Capp Recorder, restricted trade and competition in the VFC submarket by preventing Abacus and Pentagraph from supplying Capp with temperature chart recorder products.
In claims four and five, the third and fourth new claims asserted by Capp in its proposed second amended complaint, plaintiff alleges that Dickson intentionally interfered with its business relationships. In count four, Capp claims that Dickson interfered with the business relationship between Capp and the state of Kentucky. Capp had been selling private-labeled Dickson recorders to the state of Kentucky since 2002. See Pl.'s 2d Am. Compl. ¶¶ 36-37. Beginning in the spring of 2003, Capp began offering to Kentucky, instead, the Capp Recorder. Id. ¶ 77. As part of its alleged scheme to monopolize the VFC market and destroy its competition, however, Dickson — according to plaintiff's complaint — contacted the state of Kentucky on multiple occasions to "smear Capp's name," "convince Kentucky not to buy from Capp," and provide Kentucky with new "bid specifications" for the specific purpose of preventing Capp from bidding for Kentucky's business. Id. ¶¶ 124-25. Capp claims that Dickson's actions have resulted in a loss of business with Kentucky and thus brings a claim for intentional interference with business relations.
In count five Capp brings an identical claim based upon Dickson's communications with Abacus and Pentagraph, the former manufacturer and supplier of the Capp Recorder. Capp alleges that Dickson, through its use of threats and intimidation, persuaded Abacus and Pentagraph to cease manufacturing the Capp Recorder as a means of eliminating competition from the VFC marketplace. Because Capp has allegedly suffered injury and lost business, it brings a claim against Dickson for intentional interference with business relations.
Discussion
Federal Rule of Civil Procedure 15(a) allows a plaintiff to seek leave of court to amend a complaint: "a party may amend [its] pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). Leave to amend will be denied, however, where allowing the amendment would cause undue prejudice to the non-moving party, where the movant exhibits bad faith or ulterior motives, or where the amendment would be futile. See Foman v. Davis, 371 U.S. 178, 182 (1962); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). Grant or denial of leave to amend "is within the sound discretion of the district court." Cornell Co., Inc. v. Occupational Safety Health Rev. Comm'n, 573 F.2d 820, 823 (3d Cir. 1978).
"[P]rejudice to the non-moving party is the touchstone for the denial of an amendment." Lorenz v. CSX Corp., 1 F.3d 1406, 1413 (3d Cir. 1993) (citation omitted). As another court in this district has summarized, "[c]ourts have found undue prejudice to the non-moving party and denied leave to amend where the amendment would have asserted new claims, where new discovery would have been necessary, where the motion for leave was filed months after the factual basis of the amendment was discovered by the moving party, and where the motion for leave was brought after summary judgment motions were filed." Cummings v. City of Phila., 2004 WL 906259, *4 (E.D. Pa. Apr. 26, 2004). Indeed, the Third Circuit has emphasized that leave to amend will be denied where the amended complaint would raise new issues and require extensive factual investigation following the close of discovery. See Berger v. Edgewater Steel Co., 911 F.2d 911, 923-924 (3d Cir. 1990) (affirming denial of leave to amend where "allowing the amendment . . . would inject new issues into the case requiring extensive discovery" and where the motion for leave to amend was filed "not only four and one-half months after the information on which it was based became available, but also after the close of an extended discovery period"); see also Cummings, 2004 WL 906259, *4 (denying leave to amend where the allegedly new information was discovered over two months prior to filing a motion for leave to amend, where the amended complaint would assert a new claim requiring additional discovery, and where discovery had already closed, summary judgment motions had been filed, and the case had been put in the trial pool); Johnson v. Knorr, 2004 WL 1472788, *4 (E.D. Pa. June 11, 2004) (denying leave to file an amended complaint as untimely where the proposed amendment was based on facts of which plaintiff was aware before the close of discovery a year and a half earlier).
The Third Circuit has also held that allowing a party to amend its complaint where doing so would significantly alter the scope of the legal and factual issues in dispute can cause prejudice to the defendant. Cornell Co., 573 F.2d at 824-25 (reversing Commission's grant of leave to amend as an abuse of discretion where the new claims "completely changed the nature of the charges" and required the non-movant to secure the presence of several unavailable witnesses, and where defendant had relied upon the original allegations in preparing its defense).
In this case, plaintiff seeks to inject completely new claims into the action. On the eve of summary judgment briefing, plaintiff seeks to alter and vastly expand the scope of this action, engage in additional and extensive discovery, and delay proceedings significantly.
Indeed, plaintiff's counsel in his e-mail of August 5, 2004 outlined the broad scope of the extensive discovery that would be needed by both parties in connection with the new claims. Exhibits to Dickson/Unigage, Inc.'s memorandum of law, Exhibit F (Document No. 54). A quick perusal of the list of depositions requested, although completely open-ended, indicates that the scope of the action and the scope of the discovery would be at least double that which has already occurred. Indeed, it is clear that much of the discovery that has already occurred would have to be redone in view of the new claims. Obviously, this action, in which discovery has now been completed, would be delayed for months and months for discovery in connection with the new anti-trust and intentional interference claims. The already extensive pleadings in this action (two complaints and three answers and counterclaims) have framed the issues, and it is now time to resolve those issues, not to inject new ones. Indeed, a resolution of the present dispute may go a long way toward resolving the new issues which Capp seeks to inject.
This would be unfairly prejudicial to the defendant which has litigated this action and conducted discovery on the basis of the claims in plaintiff's amended complaint and the amended counterclaims of the defendant and would be forced to incur tremendous additional expense and time to redo much of the prior discovery and engage in very extensive additional discovery on the entirely new and different set of legal claims.
Although "delay alone . . . is an insufficient ground upon which to deny a motion to amend," Howze v. Jones Laughlin Steel Corp., 750 F.2d 1208, 1212 (3d Cir. 1984), "the risk of substantial prejudice [to the non-moving party] increases with the passage of time." Tenneco Resins, Inc. v. Reeves Bros., Inc., 752 F.2d 630, 634 (Fed. Cir. 1985). Development of Capp's theory of attempted monopolization and anticompetitive behavior would require extensive factual investigation at a late stage of an already drawn-out case. Moreover, permitting amendment would require substantial additional discovery by Dickson, as well, in order to support its defenses to Capp's new claims. Because Capp's antitrust claims arise from a distinct set of business relationships and are unrelated to the trademark issues raised by this action, I find that it would be unduly prejudicial to defendant and unnecessarily burdensome upon the court to radically change the nature and expand the scope of this action at this late stage.
Conclusion
Capp's antitrust claims and the related state tort law claims arising from Dickson's allegedly anticompetitive behavior, proposed just as discovery was about to close, would be best raised as a separate action. Accordingly, Capp's motion for leave to file a second amended complaint will be denied.
Order
And now, this ____ day of September, 2004, upon consideration of Plaintiff's Motion for Leave to File a Second Amended Complaint (Doc. #50), it is hereby ORDERED that the motion is DENIED without prejudice to plaintiff's right to bring a separate action on the new claims in an appropriate forum.