Opinion
99 Civ. 9307 (JFK)
June 27, 2001
MEMORANDUM OPINION and ORDER
Before the Court is Plaintiff's Motion for Leave to Amend its Complaint. For the reasons outlined below Plaintiff's Motion is granted in part and denied in part.
Background
The factual background of this case has been set out in great detail in a previous opinion of this Court, see Yurman Design, Inc. v. Chaindom Enters., Inc., No. 99 Civ. 9307(JFK), 1999 WL 1075942 (S.D.N.Y. Nov. 29, 1999), aff'd, ___ F.3d ___ 2001 WL 138376 (2d Cir. Feb. 15, 2001), with which familiarity is assumed. As a result, only the facts relevant to this motion will be restated.
Plaintiff Yurman Design Inc. ("Yurman") designs and produces various jewelry collections which are sold in department stores and luxury jewelry stores throughout the country. In June 1999 Yurman learned that Defendant Shieler Trading Corporation ("Shieler") was advertising two bracelets in its 1999-2000 catalogue which Yurman claims infringe its bracelet style B4995. B4995 is a bracelet made of twisted gold or sterling silver cable, placed within two silver or gold tubes with distinctive collars or endcaps; it was first published on February 5, 1994, and Yurman received a copyright registration for this design on July 1, 1997. See Compl. Ex. A. Yurman later learned that Defendant Chaindom Enterprises, Inc. ("Chaindom") was the manufacturer of the allegedly infringing bracelets. After Chaindom rejected Yurman's request to cease and desist in the manufacture and sale of the allegedly infringing designs, Yurman brought this action for copyright infringement (under the copyright laws of the United States) and misappropriation and unjust enrichment (under the laws of the State of New York) against both Chaindom and Shieler. Plaintiff has since voluntarily withdrawn its original state law claims in the light of Defense arguments that they were preempted by federal copyright law. See Pl's Mem. at 2 n. 2; see also Chaindom's Mem. at 7.
Chaindom, while acknowledging the substantial similarity between its two bracelets and Yurman's B4995 bracelet, claimed that Yurman's copyright was invalid, that Chaindom had created and published its cable jewelry designs back in 1988, and that Yurman was the infringer. See Yurman Design. Inc. v. Chaindom Enters, Inc., No. 99 Civ. 9307(JFK), 1999 WL 1075942 at *2 (S.D.N.Y. Nov. 29, 1999). *2. Chaindom provided no credible evidence of independent creation of the disputed designs, however, and, since Chaindom had neither a certificate of registration nor a denial from the Copyright Office regarding those designs, this Court dismissed Chaindom's cross-claim for copyright infringement in November, 1999. See id. at *4-*5. Furthermore, finding that Yurman demonstrated a likelihood of success on the merits of its copyright infringement claim, this Court ordered a recall of existing stock of the allegedly infringing bracelets ordered by jewelry businesses and issued a preliminary injunction enjoining Defendants from their manufacture and sale. See id. at *8 Chaindom's later motion to amend its Amended Answer to include a counterclaim for copyright infringement was also denied, since the Defendant again failed to demonstrate that it actually held a copyright for the disputed designs. See Yurman Design. Inc. v. Chaindom Enters., Inc., No. 99 Civ. 9307(JFK), 2000 WL 897141 at *5-6 (S.D.N.Y. July 5, 2000).
During discovery Yurman repeatedly sought information from Chaindom regarding any cable jewelry products manufactured by Chaindom, and in June, 2000, Chaindom produced pictures of those cable jewelry products not at issue in the instant dispute. Yurman claims that it "could not determine, from the poor quality photocopies provided, whether these bracelets infringed on Yurman's copyrighted cable jewelry designs." See Pl.'s Mem. at 2-3. It was not until December 14, 2000, in response to an order issued by Magistrate Judge Fox, that Chaindom provided Yurman access to these cable jewelry products. After inspecting them Yurman determined that some of these products infringed its B4995 design as well as additional copyright registrations. See Pl's Mem. at 4. Yurman now seeks to amend its Complaint to include additional claims of copyright infringement regarding these allegedly infringing jewelry products. Yurman also seeks to amend its Complaint to add a New York State unfair competition claim against both Defendants.
Yurman, in its Reply to Chaindom's Opposition Memorandum, states that it is withdrawing its claims regarding infringement of Copyright Registration No. Vau405-161. Pl.'s Mem. in Reply to Chaindom at 2, n. 2.
Discussion
The Federal Rules provide that leave to amend "shall be freely given when justice so requires," Fed.R.Civ.P. 15(a), but the "liberal rules of pleading in the federal system are not without limits." Levitch v. Columbia Broadcasting Sys., Inc., 94 F.R.D. 292, 295 (S.D.N.Y. 1982),aff'd, 697 F.2d 495 (2d Cir. 1983). The Court may deny leave for reasons such as "undue delay, bad faith . . ., undue prejudice to the non-moving party, and the futility of amendment," Foman v. Davis, 371 U.S. 178, 182 (1962), and the decision regarding whether to grant leave to amend is left to the Court's discretion. See Grace v. Rosenstock, 228 F.3d 40, 54 (2d Cir. 2000), cert. denied sub nom., Grace v. Genser, 121 S.Ct. 1362 (U.S. 2001).
Yurman's Proposed State Law Unfair Competition Claims
Yurman's original Complaint was filed seventeen months before Plaintiff filed this motion to amend, and discovery in this case was closed for most purposes on November 30, 2000, almost two months before this motion was filed. It would be well within the Court's discretion to deny leave to amend after such a delay. See Cresswell v. Sullivan Cromwell, 922 F.2d at 72 (denying leave to amend seventeen months after filing the Complaint); see also Phoeniz Racing, Ltd. v. Lebanon Valley Auto Racing Corp., 53 F. Supp.2d 199, (N.D.N.Y. 1999) (denying leave to amend when motion was filed fifteen months after the complaint was filed and almost two months after the close of discovery). The "burden to explain a delay is on the party that seeks leave to amend," MacDraw. Inc. v. The CIT Group Equipment Financing, Inc., 157 F.3d 956, 962 (2d Cir. 1997); see also Cresswell v. Sullivan Cromwell, 922 F.2d 60, 72 (2d Cir. 1990), and, with respect to the proposed state law claims, Yurman has not even attempted to meet this burden. Plaintiff has been aware since the inception of this case of all of the facts underlying the proposed new claims, and does not contend that there has been any intervening change in the law. Plaintiff could have asserted these claims at any time, and the failure of an attorney to recognize a potential cause of action is not a sufficient justification for granting leave to amend a complaint.See id., 922 F.2d at 72 (denying leave to amend where plaintiffs' attorneys claimed they had been unaware of a possible cause of action);see also Church of Scientology Int'l v. Time Warner, Inc., 92 Civ. 3024(PKL), 1998 WL 575194 at *2 (S.D.N.Y. Sept. 9, 1998) (denying Plaintiff's request to amend the Complaint after a new attorney identified a new legal theory), aff'd sub nom., Church of Scientology Int'l v. Behar, 238 F.3d 168 (2d Cir. 2001). In fact, Yurman offers no reason at all for its failure to assert these claims earlier. Absent any explanation justifying the proposed amendment the Court finds that this constitutes undue delay.
The deadline to complete discovery in this case was extended until January 31, 2001, to allow for an additional deposition. See Pl.'s Mem. at 10 n. 10.
While "`mere delay' is not, of itself, sufficient to justify denial of a Rule 15(a) motion," Parker v. Columbia Pictures Industries, 204 F.3d 326, 339 (2d Cir. 2000), leave to amend should not be granted if undue delay in amending the Complaint would be prejudicial to the Defendants. See State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 855 (2d Cir. 1981) (noting that prejudice to the opposing party is perhaps the most important reason for denying leave to amend). To determine prejudice, the Court must decide if the amendment would "(i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction." Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993). Proposed amendments which would introduce new legal issues for discovery may easily cause prejudicial delays, Grace v. Rosenstock, 228 F.3d at 53, and "`the longer the period of an unexplained delay, the less will be required of the non-moving party in terms of a showing of prejudice.'" Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993), citing Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 47 (2d Cir. 1983).
Chaindom and Shieler argue that the addition of state law unfair competition claims at this stage of the litigation would be prejudicial, requiring extensive, expensive discovery which would delay the proceedings. Defendants anticipate that the addition of these claims would necessitate further investigation, additional depositions and document discovery; Shieler also maintains that, in order to defend against allegations of customer confusion, "a survey will likely be necessary to evaluate the perceptions of the public and comparisons of the products."See Shieler's Mem. at 4. Yurman, while acknowledging that the proposed unfair competition claims would raise legal issues not previously before the Court, see Pl.'s Mem. in Reply to Shieler at 6-7 (noting that the unfair competition claim, based on the tort of "passing off," would be distinct from the already asserted copyright infringement claims), maintains that there would be no prejudice. Yurman argues that since the factual basis for the proposed state law claims was already asserted in its original Complaint, and both defendants had the opportunity to conduct discovery based on those facts, the need for further discovery would be limited. See Pl's Mem. at 9.
Yurman has not shown, however, that the additional discovery anticipated by the Defendants would be either unnecessary or frivolous. Yurman maintains that it "should not be penalized for Shieler's decision not to conduct discovery," Pl.'s Mem. in Reply to Shieler at 3, but that argument is flawed; this is not a question of penalties. The only determination this Court must make is whether the addition of these state law claims would be prejudicial to the Defendants. Civil defendants are not required to conduct discovery with an eye towards defending against all possible legal actions that might be brought against them based on the facts in the Complaint, whether or not there are other allegations which "flow naturally from these facts." Id. Furthermore, the "liberality with which a court grants leave to amend does not impart to litigants the privilege of reshaping their legal theories endlessly."Sanders v. Thrall Car Mfg. Co., 582 F. Supp. 945, 952 (S.D.N.Y. 1983),aff'd, 730 F.2d 910 (2d Cir. 1984). Defendants have argued to this Court's satisfaction that they would require significant additional discovery in order to defend against the proposed new claims, and would be prejudiced by both the expense and delay resulting from the reopening of discovery.
The Court finds that Plaintiff unduly delayed amending its Complaint to add state law claims of unfair competition, and further finds that the additional discovery necessary to defend against this claim would be unduly burdensome and would delay the resolution of this case, thereby prejudicing the Defendants. Consequently, Plaintiff's motion for leave to include state law claims for unfair competition is denied.
Yurman's Proposed Additional Copyright Infringement Claims
Yurman also seeks to amend its Complaint to include additional claims for copyright infringement against Chaindom, and, with regard to this claim, Yurman has articulated a satisfactory explanation for its delay in amending its Complaint. Contrary to Chaindom's assertion that Yurman "was aware of the facts supporting its proposed amended complaint at the time the original complaint was filed, [and] has offered no explanation as to why the claims were not asserted earlier," Chaindom's Opp. Mem. at 4. Yurman did not know until June of 2000 that Chaindom produced any cable jewelry products other than the two bracelets advertised in the Shieler catalogue, and wasn't able to inspect the additional allegedly infringing products until the following December. See Pl.'s Mem. at 2-3. In a letter dated December 20, 2000, less than a week after determining that Chaindom had produced additional cable jewelry that allegedly infringed on Yurman's copyrights, Yurman sought leave from this Court to file a motion to amend its Complaint; the instant motion was filed one month later. Given the fact that Chaindom had not produced the jewelry for inspection earlier, despite Yurman's requests, the Court finds that Yurman did not unduly delay in filing its motion to amend its Complaint.
Chaindom argues nevertheless that Yurman should not be granted leave to amend since it would be prejudiced by the addition of new copyright claims which would "significantly delay the resolution of this case and require Chaindom to expend additional resources." Chaindom's Mem. at 3. This argument is unpersuasive. Amending a complaint naturally involves a certain amount of additional work for the parties, see Morse/Diesel. Inc. v. Fidelity Depository Co., 715 F. Supp. 578, 581 (S.D.N Y 1989), but in the instant case, since the proposed claims would mirror those already brought against Chaindom for copyright infringement, the limited discovery necessary to go forward with the proposed claims would not be unduly burdensome. Nor would opening discovery for this limited purpose significantly delay the resolution of this case because no new issues would be introduced and the scope of discovery would be limited to information regarding the jewelry designs at issue. Since Yurman has provided an adequate reason for the delay in amending its Complaint, and since the Defendant will not suffer undue prejudice, Yurman's request to amend its Complaint to include additional claims for copyright infringement is hereby granted.
Conclusion
For the foregoing reasons, Yurman's motion to amend the Complaint to include additional claims for copyright infringement against Chaindom is granted, and its motion to amend the Complaint to include state law unfair competition claims is denied. Plaintiff must file its Amended Complaint no later than July 16, 2001, and all discovery relating to the new claims must be completed by October 15, 2001.
SO ORDERED.