Opinion
CAUSE NO. IP 99-1195-C-H/S
November 4, 2003
ENTRY ON PENDING MOTIONS
Defendants mySimon, Inc. and CNET Networks, Inc. have filed three motions challenging portions of the Third Amended Complaint filed by plaintiff Simon Property Group, L.P. ("SPG"). Defendants have moved: (1) to strike certain allegations of the Third Amended Complaint that set forth the earlier procedural history of this litigation; (2) to dismiss on a variety of grounds Counts 1, 5, 6, 9-15, and 17-19 of the Third Amended Complaint; and (3) to dismiss Count 4 of the Third Amended Complaint as not ripe for adjudication. The court grants the motions to strike and to dismiss Count 4, and denies the motion to strike multiple counts.
I. Defendants' Motion to Strike
SPG's Third Amended Complaint sets forth some of the long history of this litigation. It includes a summary of the jury verdict in SPG's favor in August 2000 and portions of the court's Entry on Parties' Post-Verdict Motions issued on January 24, 2001. SPG's allegations also acknowledge this court's grant of a new trial on all issues, but without explaining that the court granted a new trial on all issues because SPG violated its discovery obligations before the original trial. Third Am. Cplt. ¶¶ 11-14; see also Simon Property Group, L.P. v. mySimon, Inc., 2003 WL 1807135 (S.D. Ind. March 26, 2003) (entry granting new trial). The Third Amended Complaint also includes allegations about mySimon's advertising activities after the jury verdict. In those allegations SPG criticizes mySimon for having failed to change its business activities in the wake of a jury verdict, but one that has since been nullified. See Third Am. Cplt. ¶¶ 81-85 87.
Pursuant to Rule 12(f) of the Federal Rules of Civil Procedure, defendants have moved to strike these allegations as redundant, immaterial, impertinent and/or scandalous. The allegations describing the jury verdict and mySimon's responses to it are plainly immaterial and could be highly prejudicial to defendants. The allegations would also be "scandalous," at least to the extent that SPG tried to put those allegations before the jury. Motions to strike ordinarily are not favored, but this case is unusual because of SPG's plain intent to use the prior verdict as evidence against defendants. Accordingly, the allegations will be stricken. See Talbot v. Robert Matthews Dist. Co., 961 F.2d 654, 664-65 (7th Cir. 1992) (district court has discretion to strike allegations as scandalous if they may cause unfair prejudice to opposing party).
SPG makes its intentions evident in its brief: "The fact that one jury determined relevant facts in favor of Simon certainly bears a relation to whether Simon's allegations have merit. If one jury determined facts associated with infringement, competition and willfulness in Simon's favor, it is more likely that a second jury will do so as well." SPG Br. at 3.
The court can understand SPG's desire to tell a second jury what happened at the first trial in this case. However, this desire carries with it great potential for confusion, prejudice, and waste of time that would cause all such information to be excluded from the second trial pursuant to Rule 403 of the Federal Rules of Evidence.
For example, if the second jury were to learn of the first verdict, fairness would require that they also be told that SPG won that verdict only by — not to put too fine a point on it — cheating. Before and during the first trial, SPG failed to produce to mySimon highly probative evidence concerning the pivotal issues in the trial — issues on which the Seventh Circuit and this court have recognized that SPG's position was already tenuous at best. See 2003 WL 1807135 at * 13, Entry Granting New Trial Motion and Addressing Other Pending Motions (March 26, 2003), citing Simon Property Group, L.P. v. my Simon, Inc., 282 F.3d 986, 989 (7th Cir. 2002). Even if SPG were willing to accept having the court explain those matters to the jury to put the prior verdict in context, the potential for confusion, waste of time, and unfair prejudice is self-evident.
SPG's allegations about these matters are equivalent to a prosecutor amending an indictment to allege that the defendant was found guilty in his first murder trial, without telling the second jury that the conviction was set aside because the prosecution had violated the principles of Brady v. Maryland, 373 U.S. 83 (1963), which required the prosecution to turn over exculpatory evidence. Such information should of course be kept from the second jury. The information could not possibly promote the fair resolution of the merits of the underlying claims and would threaten unfair prejudice. It would do so for precisely the reasons SPG has embraced in its brief: that the prior verdict (even though it was obtained unfairly) shows that its claims have merit and make a second verdict in its favor more likely. SPG's logic is flawed precisely because SPG won the first verdict by violating its discovery obligations. The potential for unfair prejudice is evident.
SPG stated in a footnote to its brief that the court need not and should not determine admissibility of these facts at this time. SPG Br. at 4 n. 10. Admissibility flows from materiality and the Rule 403 considerations.
SPG argues that evidence of the first jury verdict and mySimon's response to it — which was to fight the verdict in court and to continue and expand its course of advertising while paying a royalty escrow pending a final judgment — will help show that mySimon's alleged infringement was willful and deserves a punitive damage award. The argument is creative, but it is fundamentally unfair. It attempts in essence to make further unfair use of SPG's breach of its discovery obligations. Allowing such use would aggravate rather than remedy the harm caused by SPG and its counsel in the first trial. Because the original verdict was obtained by SPG's breach of its discovery obligations, that verdict is entitled to no weight at all. Further, the potential for unfair prejudice, confusion, and waste of time remains just as strong.
Of course, even if SPG's allegations were left in the complaint, the court would still have the power to prevent such disclosures to the jury (supported by sanctions up to and including dismissal and monetary sanctions). The mere presence of these allegations in a public court filing does not, by itself, establish prejudice. SPG's defense of the allegations, however, shows that it intends to make use of them in some way. Also, SPG has not shown how it would be prejudiced if the court grants the motion to strike these allegations, at least apart from the fact that the court's reasoning would lead to exclusion of this highly prejudicial and irrelevant evidence at trial. The court finds that the most prudent course at this point is to discourage the mischief that could result from leaving these allegations in the operative version of the complaint, which could cause unfair prejudice to defendants in ways that are limited only by the imagination of zealous counsel. Accordingly, the court grants defendants' motion to strike Paragraphs 11-14, 81-85, and 87 of the Third Amended Complaint.
II. Motion to Dismiss Numerous Counts
Defendants have also moved to dismiss numerous counts from the Third Amended Complaint.
Most of the targeted counts are those that SPG included in one or more earlier versions of the complaint but dropped in later versions of the complaint. Defendants contend that SPG abandoned those claims by first pleading them and then omitting them from a newer version of the complaint. Defendants conclude that SPG should not be permitted to renew such claims.
When the court granted the new trial, the court also had pending a motion by SPG to amend its complaint after the trial to add a new party. Because the court granted the new trial, the court also allowed the requested amendment. The court stated that the new trial would encompass "the full scope of the parties' dispute" and allowed SPG to file "one complete amended complaint." 2003 WL 1807135, at *15. Because this case is starting over in so many respects, the court sees no reason to bar SPG from alleging any claims it may have that arise from the same circumstances. To the extent that SPG dropped previously alleged claims, it did so without prejudice, at least in the absence of an intervening trial with a final result. The ordinarily liberal amendment standards of Rule 15 apply to allow the amendments at this stage of the case, long before a second trial.
Defendants argue that Counts 17, 18, and 19, for conversion and tortious interference with business relationships should be dismissed as barred by the two-year statute of limitations. Under Rule 15(c)(2) of the Federal Rules of Civil Procedure, however, the amendment of the complaint to add these claims should relate back to the filing of the original complaint because they all arise from the same events. These counts are therefore timely, at least as to defendant my Simon.
Defendants argue that Count 1 for infringement of a federally registered trademark should be dismissed because SPG has failed to allege its ownership of a registered trademark with priority over defendants' use of the mySimon marks. SPG alleges in the Third Amended Complaint that the marks in question are owned by SPG or its "controlled affiliates." ¶ 43. SPG also alleges infringement of the registered marks. On a motion to dismiss, the court must treat the plaintiffs allegations as true and must allow alternative pleading. Perhaps counsel and the parties have a clear picture of the various registrations at issue, their ownership, and the timing of their use and their relative priorities. On this record, however, these are not questions the court can resolve on the motion to dismiss.
Defendants point out that Counts 5 and 6 for "false advertising" and "false association" were not included in any prior versions of the complaint. The claims are pled under 15 U.S.C. § 1125(a)(1)(B). SPG's allegations along these lines are not at all specific, and they do appear to duplicate its trademark infringement claims under 15 U.S.C. § 1114 and 1125(a)(1)(A). In their reply brief, defendants argue the merits extensively and suggest that SPG is trying to use these new theories to avoid having to prove secondary meaning, which has been such a problematic issue in this case. These are not issues the court is prepared to decide definitively on bare pleadings, and especially where the most extensive discussion of the issue appears in my Simon's reply brief.
This court has previously applied the requirements of Rule 9(b), that fraud be pled with particularity, to allegations of false advertising under 15 U.S.C. § 1125(a)(1)(B). See Sanderson v. Brugman, 2001 WL 699876 (S.D. Ind. May 29, 2001). Defendants have not raised this issue (which has divided district courts), and in this case, discovery should easily cure any lack of specificity in the pleadings.
Accordingly, defendants' motion to dismiss Counts 1, 5, 6, 9-15, and 17-19 is hereby denied.
III. Motion to Dismiss Count 4
Count 4 of the Third Amended Complaint alleges that mySimon engaged in fraud in filing a federal trademark application. Defendants argue that Count 4 should be dismissed for lack of subject matter jurisdiction because the claim is not yet ripe. SPG has failed to allege that mySimon has actually procured a federal trademark registration by fraud, so the claim presents no case or controversy. See Country Mut. Ins. Co. v. American Farm Bureau Federation, 876 F.2d 599, 601 (7th Cir. 1989) (affirming dismissal of similar claim for this reason). SPG agrees that the claim is not yet ripe but points out that the court previously allowed similar unripe claims by both sides to stay in the case, though they were all voluntarily dismissed just before the trial in August 2000. However, the jurisdictional issue was first raised just before trial, followed by the dismissal. At this point, Count 4 does not present a ripe case or controversy within this court's jurisdiction under Article III of the Constitution. If the Patent and Trademark Office issues a registration so that this claim becomes ripe in the future, the parties and the court may address the situation at that time. For now, the court lacks jurisdiction over Count 4, and it is hereby dismissed for lack of subject matter jurisdiction.
So ordered.