Opinion
No. C 02-00741 JSW.
November 10, 2004
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR LEAVE TO AMEND COMPLAINT
On October 29, 2004, this matter came before the Court for hearing on Plaintiff's motion for leave to amend his complaint. Plaintiff Charles R. Meeker ("Plaintiff") was represented by Joseph Rimac, Kevin Gill and William Reilly. Defendants were represented by Michael J. Ioannou. Having considered the parties' pleadings, including supplemental evidence submitted by Plaintiff on November 5, 2004, the relevant legal authority, and having had the benefit of oral argument, the Court GRANTS IN PART AND DENIES IN PART Plaintiff's motion.
I. Background
Plaintiff initially filed his complaint on February 13, 2002. Defendants answered the complaint on or about April 26, 2002.
On September 3, 2004, Plaintiff filed a motion for leave to amend his complaint to: (1) substitute persons and entities whom Plaintiff states were previously sued as Doe defendants, including seven individual members of a partnership and one shareholder in a corporation; (2) add three additional defendants Dark Star Cellars, Roudon-Smith Vineyard, and Hidden Mountain Vineyard ("the winery defendants"); (3) add four additional state law causes of action for intentional interference with contract, intentional interference with prospective economic relationships, conversion, and common law fraud and deceit; and (4) add prayers for relief relating to attorneys' fees and punitive damages.
II. Analysis
Federal Rule of Civil Procedure 15(a) permits a party to amend its pleading once as a matter of right at any time before a responsive pleading is served. Once a responsive pleading has been served, however, amendment requires written consent of the adverse party or leave of the court. In accordance with the Rule 15(a)'s liberal pleading standard, leave of the court "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). Though the decision to grant or deny a motion for leave to amend is governed by the district court's discretion, the general rule is that amendment of the pleadings is to be permitted unless the opposing party makes a showing of bad faith, undue delay, prejudice to the opposing side, and futility of amendment. See Forman v. Davis, 371 U.S. 178, 230 (1962); Lockheed Martin Corporation v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999).
A. The Proposed New Defendants.
At the hearing on this motion, Plaintiff conceded he was aware of the identities of the winery defendants, the Meeker Family Vineyard, Meeker Vineyards, Inc. and the Meeker Family Partnership (hereinafter the "Meeker Defendants"), as of July 2003 at the latest. Plaintiff asserts that, notwithstanding this fact, leave to amend should be granted because he did not know how these proposed defendants were involved in this case until Defendant Meeker was deposed.
1. The motion is denied as to the winery defendants.
In opposition to the motion, the Defendants submitted wine contracts that were produced to the Plaintiff in July 2003 at the latest. Those contracts clearly provide that the defendant wineries were required to use the "Meeker Vineyard" designation on their wine. Plaintiff was thus on notice of the identities of those defendants and the potential claims against them at that time. See Declaration of Michael J. Ioannou in Support of Defendants' Opposition to Plaintiff's Motion to Amend ("Ioannou Decl."), Ex. E.
Following the hearing on this motion, Plaintiff submitted supplemental evidence purporting to show that Dark Star Cellars continues to sell wine labeled with "Meeker Vineyard," as of 2004. ( See Declaration of Karl H. Plischke.) Plaintiff asserts this fact demonstrates a basis for amending the complaint to include Dark Star. This evidence, however, does not explain Plaintiff's delay in seeking to amend the complaint to include Dark Star, when he had in his possession Dark Star's contract with Defendant and the knowledge that Dark Star apparently continued to place the "Meeker Vineyard" mark on its wines after 2000. (Declaration of Michael J. Ioannou in Support of Opposition to Motion to Amend ("Ioannou Decl."), Ex. K-Declaration of Martin Meeker in Opposition to Plaintiff's Motion for Summary Judgment, ¶ 8.) Plaintiff had ample evidence of Dark Star's potential liability in his possession well before he sought leave to amend.
Delay alone generally does not justify denying a motion for leave to amend. Lockheed 194 F.3d at 986. The Court, however, finds that Plaintiff has not sufficiently explained the delay in seeking to add the winery defendants, especially in light of the information set forth in the wine contracts. Further, if the Court were to allow Plaintiff to add the winery defendants, it is likely that the Court would have to reopen discovery and further delay these proceedings, resulting in prejudice to these potential defendants. See id. Accordingly, even considering Plaintiff's supplemental evidence, the Court adopts its tentative ruling and DENIES the motion for leave to amend to the extent Plaintiff seeks to add the winery defendants.
2. The motion is granted in part as to the Meeker Defendants.
Turning to the Meeker Defendants, the Court does not find persuasive Plaintiff's assertions that he could not have learned how "Meeker Family Vineyards," "Meeker Family Partnership," and "Meeker Vineyards, Inc." were involved in this case prior to Defendant Meeker's deposition. However, the Court shall GRANT Plaintiff leave to amend the complaint to substitute those entities for previously named Doe defendants.
The Court grants Defendants' request to take judicial notice of Defendant Meeker's Answer and the fact that the Answer includes a reference to "Meeker Vineyards, Inc." and "Meeker Family Vineyards."
Unlike the situation with the winery defendants, it does not appear to the Court that additional discovery or a further delay in the proceedings would be required if the Court permits this amendment. Moreover, Defendants made no showing that they would be prejudiced by this amendment. Rather, Defendants indicated a willingness to accept the Court's tentative ruling on this aspect of Plaintiff's motion.
The substitution of the individual members of the Meeker Family Partnership and Carol Meeker, as a shareholder of Meeker Vineyards, Inc., is different. Plaintiff offered the Court no reason why the presence of these parties was necessary to adjudicate the action and has not set forth any facts suggesting that these individuals engaged in any conduct supporting Plaintiff's claims. Plaintiff did express a concern that the assets of the corporation and the partnership might be dissipated pending the resolution of the litigation. However, in the event that Plaintiff receives a judgment in his favor and those entities are unable to satisfy such a judgment, the Court finds that Plaintiff would have adequate post-judgment remedies available. Amendment to include the individual members of the partnership and Carol Meeker is simply not required to adequately prosecute this case and to protect Plaintiff's interests.
Accordingly, Plaintiff's motion for leave to amend is GRANTED to the extent it seeks to substitute the Meeker Family Partnership, Meeker Vineyards, Inc. and Meeker Family Vineyards for Doe defendants. Plaintiff's motion for leave to amend is DENIED to the extent it seeks to substitute the individual members of the partnership and Carol Meeker for Doe defendants.
B. The Proposed New Causes of Action.
As noted, Plaintiff seeks to add four new state law causes of action. In light of the advanced stage of this litigation and in the interest of assisting the Court in evaluating whether amendment would be futile, at the hearing the Court requested that Plaintiff set forth the facts supporting each of these causes of action. Having considered Plaintiff's factual proffer, the Court finds that its tentative ruling should be modified in part.
1. Plaintiff shall be granted leave to amend the complaint to plead intentional interference claims.
At the hearing, Plaintiff proffered a version of events, including the representation that Plaintiff has suffered damages as a result of Defendants' alleged conduct that, if proven, could support a finding that Defendants intentionally interfered with at least some of Plaintiff's contracts and/or prospective economic relations. Moreover, if Plaintiff prevails on his trademark infringement claims, there is a basis on which a jury could find, as to the claim for intentional interference with prospective economic relationships, that the Defendants "engaged in conduct that was wrongful by some legal measure other than the fact of interference itself." Arntz Contracting Co. v. St. Paul Fire and Marine Ins. Co., 47 Cal. App. 4th 464, 476 (1996) (quoting Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 393 (1995)).
Accordingly, Plaintiff's motion is GRANTED to the extent he seeks leave to amend to add causes of action for intentional interference with contractual relations and intentional interference with prospective economic relationships.
2. Plaintiff is given leave to amend common law fraud.
The Court hereby modifies in part its tentative ruling on the fraud claim. As currently drafted, Plaintiff's proposed amended complaint fails to allege his fraud claim with the requisite specificity. See Fed.R.Civ.P. 9(b); Lazar v. Superior Court, 12 Cal. 4th 631, 645 (1996). If Plaintiff chooses to amend his complaint in accordance with this Court's order, he must be prepared to allege this claim with the requisite specificity.
Plaintiff's proposed amendment also alleges facts that misrepresentations were made to third parties and not to him. Plaintiff has not alleged that Defendant intended that these alleged misrepresentations would be conveyed to Plaintiff (directly or indirectly), or that he expected them to be, in order to influence Plaintiff's conduct. Plaintiff also fails to allege that he somehow relied on these alleged misrepresentations to third parties to his detriment. To that extent, Plaintiff's proposed amended complaint does not state a viable claim. See, e.g., Crane Helicopter Services v. U.S. Aviation Underwriters, 2000 U.S. Dist. LEXIS 22426, *4 (E.D. Cal. 2000).
The Court did inquire of Plaintiff whether Defendants had made any false representations to him. In response, Plaintiff asserted that Defendant Meeker represented he did not intend to use the "Meeker Vineyard" name in connection with wine or a vineyard designation. According to Plaintiff's previous submissions to the Court, that representation was made at the latest in 1996. Plaintiff, however, contended he did not learn that Defendants were using the mark until June 2000. See Declaration of Charles Meeker in Support of Plaintiff's Cross-motion for Summary Judgment ¶¶ 26, 58-60. Assuming these facts to be true for purposes of this motion only, the Court concludes that amendment of the fraud claim would not be futile.
Accordingly, Plaintiff's motion for leave to amend to add a fraud claim is GRANTED to this limited extent.
3. Plaintiff's motion to add a claim for conversion is denied.
The Court adopts its tentative ruling on Plaintiff's conversion claim. The essential elements of a claim for conversion are: (1) Plaintiff's ownership or right to possession of the property at the time of the conversion; (2) Defendants' conversion by wrongful act or disposition of Plaintiff's property rights; and (3) damages. See Kremen v. Cohen, 337 F.3d 1024, 1029 (9th Cir. 2003); Hartford Financial Corp. v. Burns, 96 Cal. App. 3d 591, 598 (1979). "`It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use." Hartford Financial, 96 Cal. App. 3d at 598 (quoting Igauye v. Howard, 114 Cal. App. 2d 122, 126 (1952)) (emphasis added).
In his proposed amended complaint, Plaintiff makes conclusory allegations that he "has and had an ownership [ sic], right to possession and exclusive use of the name Meeker Vineyard(s) at the time defendants . . . wrongfully began using the name Meeker Vineyard(s)," and that this "act of wrongfully using the name Meeker Vineyard(s) resulted in damages to the Plaintiff." (Proposed Amended Complaint, ¶¶ 83, 84.)
If these facts were the only basis for Plaintiff's conversion claim, it appears to the Court that this cause of action is nothing more than a restatement of Plaintiff's trademark infringement claim.
In support of his motion, however, Plaintiff suggests that his conversion claim is based upon the allegation that Defendant Meeker's "actions in fraudulently registering the Meeker Vineyards mark with the USPTO were meant to prevent Plaintiff from exercising his rights as senior user to register the mark," an allegation not set forth in the proposed amended complaint. (Motion to Amend at 11:21-23.)
The parties have not presented the Court with authority in which a claim for conversion of a trademark has been recognized as a cognizable legal theory. Nor has the Court found any such authority as a result of its own research. Plaintiff asserts that the Ninth Circuit recognized the existence of this cause of action in Bancroft Masters, Inc. v. Augusta National, Inc., 223 F.3d 1082 (9th Cir. 2000). In the Bancroft case, however, the court did not address the question of whether a trademark could be converted. Rather, the focus of the court's opinion was whether the defendant had engaged in tortious conduct in regard to the plaintiff's domain name. Id. at 1087 (accepting plaintiff's allegation that defendant "interfere[d] wrongfully with plaintiff's use of its [plaintiff's] domain name and to misappropriate that name . . . for [defendant's] own use"); id. at 1089 (Sneed, J., concurring based on the "assumption that Augusta National, through its letter to NSI, engaged in tortious conduct, i.e. that they intended to effect of conversion of the masters.com domain name") (emphasis added). Thus, contrary to Plaintiff's assertion, the Bancroft case does not provide direct support for Plaintiff's argument.
Defendants assert that there is no support for a cause of action for conversion of a trademark, relying on Big Time Worldwide Concert Sport Club at Town Center, LLC v. Marriott International, Inc., 236 F. Supp. 2d 791 (E.D. Mich. 2003), Neles-Jamesbury, Inc. v. Bill's Valves, 974 F. Supp. 979 (S.D. Tex. 1997), and Liebowitz v. Maxwell, 32 U.S.P.Q.2d 1683 (S.D.N.Y. 1994). Although none of those cases are binding on this Court, the Court concludes in any event that they are not persuasive.
In the Neles case, for example, the court rejected the plaintiff's conversion claim because Texas law only recognized conversion of intangible property where such property had been "merged" into a document. Neles, 974 F. Supp. at 982. However, in the Kremen case, the Ninth Circuit concluded that California does not follow the "strict merger requirement." Kremen, 337 F.3d at 1031.
In the Liebowitz case, the court rejected the conversion claim because defendants had not converted anything "tangible." Liebowitz, 32 U.S.P.Q.2d at 1686. See also Financial Matters, Inc. v. Pepsico, Inc., 1993 WL 378844, *4 (S.D.N.Y. Sept. 24, 1993) (rejecting conversion claim under New York law on basis that a trademark is not "tangible" property). Again, however, the Ninth Circuit expressly recognized in the Kremen case that the domain name at issue was not "tangible"; rather, it noted that "Kremen . . . had an intangible property right in his domain name." Kremen, 337 F.3d at 1030.
Finally, the Big Time case could actually be construed to support Plaintiff's argument, at least on a factual basis. In that case, the court concluded, without extensive analysis, that although Michigan law provided for conversion of intellectual property, the law would not extend to trademarks. Big Time, 236 F. Supp. 2d at 807. The court also ruled, in the alternative, that even if the tort were recognized, the facts would not support a claim for conversion because, in contrast to the facts of this case, the defendant was not using the mark in question and the parties' marks were only "substantially similar" to one another. Id.
The Big Time case is also procedurally distinguishable, in that the court faced this issue in connection with a motion for a preliminary injunction. Thus, unlike here, the court was called upon to evaluate the likelihood of Plaintiff's success on his infringement claim, which would serve to establish the necessary element that the defendant's use of the mark was wrongful.
Having considered this authority, the Court concludes that a trademark would be considered "property" for purposes of a claim of conversion under California law. Cf. Kremen, 337 F.3d at 1030 (applying three-part test to determine whether a property right exists). In light of the fact that California law does not impose a "strict merger requirement", the Court also concludes that the fact that a trademark is "intangible" would not be fatal to Plaintiff's claim.
However, the Court is also cognizant of the nature of the "property right" granted to the owner of a trademark. In Kremen, the Ninth Circuit likened "[r]egistering a domain name [to] staking a claim to a plot of land at the title office. It informs others that the domain name is the registrant's and no one else's." Id. In contrast, the essence of the property right granted to a trademark owner is "to prevent customer confusion as to who produced the goods and to facilitate differentiation of the trademark owner's goods." International Order of Job's Daughters v. Lindeburg and Company, 633 F.2d 912, 919 (9th Cir. 1981). Cf. 1 McCarthy on Trademarks and Unfair Competition § 2.14 at 2-31 ("Once created, the `property' right of a trademark is invaded by a junior user's use of a similar mark that is likely to create confusion. Hence, the `property' in a trademark is the right to prevent confusion.") (emphasis added).
In this Court's view, the nature of the property right attendant to a trademark is sufficiently different from the property right attendant to a domain name. Thus, the Court concludes that a claim for conversion should not be extended to reach the intangible intellectual property rights in a trademark. Even if the law of conversion would be extended to reach trademarks, the Court concludes that the facts of this case would not support such a claim.
In contrast to the plaintiff in the Bancroft case, Plaintiff has neither contended that Defendant obtained the "meekervineyards.com" website by trickery or deceit nor engaged in wrongful conduct to wrongfully wrest Plaintiff of that name. Plaintiff could not allege such facts because Plaintiff never owned the "meekervineyards.com" domain name. In addition, although Plaintiff contends that Defendant Meeker fraudulently deceived the PTO and claims that this conduct was designed to prevent Plaintiff from registering his mark as the senior user, even accepting these facts as true, the Court cannot conclude that Plaintiff would, in fact, have been prevented from doing so. Plaintiff also does not suggest that the Defendants wrongfully "wrested" a registered trademark from him. Again, Plaintiff could not plead such facts as he has not registered (and apparently has not attempted to register) the contested mark. See Kremen, 337 F.3d at 1035 (recognizing claim for conversion of domain name where third party forged letter resulting in transfer of domain name from plaintiff to that third party); Bancroft, 223 F.3d at 1087 (assuming tortious conduct where plaintiff allegations that defendant sent letter challenging plaintiff's use of domain name for wrongful purpose).
Accordingly, the Court finds there are no facts that Plaintiff could allege to support a claim for conversion of his rights in the contested mark and to grant Plaintiff leave to add this claim would be an exercise in futility. The motion for leave to amend is DENIED to the extent Plaintiff seeks leave to plead a claim for conversion.
C. The Proposed Prayers for Relief.
Plaintiff's motion is GRANTED to the extent he seeks to add a prayer for relief for attorneys' fees. In light of the Court's ruling on the various state law tort causes of action, Plaintiff's motion is also GRANTED to the extent he seeks to add a prayer for relief for punitive damages on those claims.
III. Conclusion
For the reasons set forth above, the Court hereby GRANTS IN PART AND DENIES IN PART Plaintiff's motion for leave to amend his complaint.
If Plaintiff chooses to stand by his decision to amend the complaint, he shall file a first amended complaint consistent with the Court's Order within ten (10) days of the date of this Order. Defendants shall have twenty (20) days following service of the first amended complaint to file their answers or other responsive pleadings. The Court advises Defendants that barring extraordinary circumstances, it will not entertain a Rule 12(b)(6) motion on the state law claims, having already considered the Defendants' arguments as to why Plaintiff should not have been given leave to amend to add those causes of action.