1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Gary Wagner, et al., No. CV-19-03216-PHX-SMB
10 Plaintiffs, ORDER
11 v.
12 Derek Adickman, et al.,
13 Defendants. 14 15 Pending before the Court is Plaintiffs/Counterdefendants, Gary Wagner and 16 Giggling Marlin Inc.’s (“Giggling Marlin”) Motion to Dismiss1 the 17 Defendant/Counterplaintiff’s Counterclaim (Doc. 91.) The Counterplaintiff, Derek 18 Adickman, has filed a response with the Court, (Doc. 92), and the Counterdefendants have 19 filed their reply. (Doc. 93.) Pursuant to LRCiv. 7.2(f) the Court elects to rule on the motion 20 without oral argument. 21 I. Background 22 A. Factual Background 23 The grounds for Counterdefendants’ motion are purely procedural and technical in 24 nature. As such, the substantive facts of the case need only be recited with brevity. Giggling 25 Marlin is a Wyoming corporation in the business of importing tequila from Mexico. In the 26 course of its operation, Giggling Marlin entered a business relationship with the 27
28 1 While styled as a motion to dismiss. Giggling Marlin’s request is more properly characterized as a motion to strike, and the Court will treat it as such. 1 Defendant/Counterplaintiff Adickman, the exact nature of that relationship is disputed by 2 the parties. Giggling Marlin alleges that from approximately 2015 until 2018, Mr. 3 Adickman undertook to store and distribute tequila imported from Mexico by Giggling 4 Marlin for distribution in the United States. In 2019, a dispute arose between the parties, 5 and Giggling Marlin alleges it terminated its relationship with Mr. Adickman and requested 6 return of certain inventory and equipment allegedly in Mr. Adickman’s possession. 7 According to Giggling Marlin, Mr. Adickman did not respond to this demand. 8 B. Procedural background 9 On May 17, 2019, Giggling Marlin filed a complaint with this Court against Mr. 10 Adickman, asserting claims for trademark infringement, unfair competition, and breach of 11 contract. (Doc. 1.) Giggling Marlin amended its complaint for the first time on June 18, 12 2019. (Doc. 17.) On July 16, 2019 Mr. Adickman filed a motion to stay the proceedings in 13 order for the parties to pursue arbitration, (Doc. 29), and the Court granted that motion of 14 August 13, 2019. (Doc. 40.) On January 31, 2020, Mr. Adickman filed a motion to continue 15 the stay on proceedings. (Doc. 54.) That same day, Giggling Marlin filed a motion seeking 16 to amend its complaint for a second time and add additional counts. (Doc. 58.) The Court 17 granted both the motion to continue the stay of proceedings, (Doc. 64), and Giggling 18 Marlin’s motion to file the Second Amended Complaint. (Doc. 72.) 19 On May 13, 2020, Mr. Adickman filed a response to the Second Amended 20 Complaint that was titled “Defendant's Answer to Plaintiffs [sic] Second Amended 21 Complaint, Affirmative Defenses, Counter-Claims and Demand for Jury Trial.” (Doc. 74.) 22 On July 20, 2020, Giggling Marlin filed this motion with the Court seeking to dismiss the 23 Defendant’s Counterclaims. (Doc. 91.) As cause, Giggling Marlin asserts that 24 Unbeknownst to it “[Defendant’s] counterclaim filed on May 13, 2020 made major and 25 significant amendments to his original Counterclaim and added a new count.” (Doc. 91 at 26 2.) Giggling Marlin further asserts that the “new Counterclaim is not marked as an 27 Amended Counterclaim” nor was notice given to the Court or Giggling Marlin that the 28 Counterclaim was amended. (Id.) Based on these reasons, Giggling Marlin asserts 1 Defendant’s Counterclaims ought to be dismissed for failure to comply with Rule 15(a)(2). 2 II. Analysis 3 The court declines to strike Mr. Adickman’s amended counterclaim because 4 Giggling Marlin’s Second Amended Complaint changed the theory or scope of its case. 5 The circumstances in which amending a complaint gives the opposing party the right to 6 amend its counterclaims is an unsettled and widely debated issue. Wagner v. Choice Home 7 Lending, 266 F.R.D. 354, 357-59 (D. Ariz. 2009). District courts across the country have 8 developed several distinct approaches2 to the question. Sierra Dev. Co. v. Chartwell 9 Advisory Grp. Ltd., 2016 U.S. Dist. LEXIS 160308, at *10-11 (D. Nev. Nov. 18, 2016). 10 While it appears the Ninth Circuit has declined to rule on the issue, the vast majority of 11 recent opinions by district courts in the Ninth Circuit appear to adopt what has been referred
12 2 Instructive on these different approaches is the opinion of UDAP Indus. v. Bushwacker 13 Backpack & Supply Co., 2017 U.S. Dist. LEXIS 66803, at *8-10 (D. Mont. May 2, 2017), where the Court explained that: 14
15 Although it appears the Ninth Circuit has yet to address the issue, district courts here and throughout the country have historically taken three different 16 approaches [to when amendment of a complaint allows amendment of a 17 counterclaim as of right]. These approaches have been characterized as narrow, moderate, and permissive. Under the narrow approach, 18 counterclaims as of right are permissible “only if they directly relate to the 19 changes in the amended complaint.” Under the permissive approach, “once a plaintiff amends a complaint, the defendant always has a right to amend to 20 bring new counterclaims, without regard to the scope of the amendments.” 21 Falling in between the two, the moderate approach allows counterclaims 22 without leave of court “only when the amended complaint changes the theory 23 or scope of the case, and then, the breadth of the changes in the amended response must reflect the breadth of the changes in the amended complaint.” 24 There is no requirement under this approach “that a defendant specifically tailor its answer to the amended complaint, rather the court considers whether 25 the defendant's answer affects the scope of the litigation in a manner 26 proportional with the amended complaint.” “The rationale for this rule is an equitable consideration that if one party expands its case by adding new 27 theories and claims, the other party may do likewise.” 28 UDAP Indus., 2017 U.S. Dist. LEXIS, at *8-10. (internal citations omitted). 1 to as “the moderate approach.” See e.g., Tate-Robertson v. Walmart Inc., 2019 U.S. Dist. 2 LEXIS 209182, at *5 (C.D. Cal. Aug. 13, 2019) (citing City of W. Sacramento v. R & L 3 Bus. Mgmt., 2019 U.S. Dist. LEXIS 88139, at *4 (E.D. Cal. May 23, 2019)); UDAP Indus. 4 v. Bushwacker Backpack & Supply Co., 2017 U.S. Dist. LEXIS 66803, at *7-10 (D. Mont. 5 May 2, 2017); Sierra Dev. Co., 2016 U.S. Dist. LEXIS 160308 at *11. This Court elects to 6 do the same. 7 Under the moderate approach, a defendant can amend his counterclaim without 8 leave of the Court so long as (1) the amendment comes in response to a plaintiff’s 9 amendment of the underlying complaint, (2) the plaintiff’s amendment “changes the theory 10 or scope” of its complaint, and (3) the changes to the counterclaim “reflect the breadth of 11 the changes in the amended complaint.” UDAP Indus., 2017 U.S. Dist. LEXIS 66803, at 12 *6. The changes in the counterclaim need not arise from or directly relate to the subject 13 matter of the changes in the compliant, “rather the court considers whether the defendant's 14 answer affects the scope of the litigation in a manner proportional with the amended 15 complaint.” Id. (quoting Buffalo Wild Wings, Inc. v. Buffalo Wings & Rings, LLC, 2011 16 U.S. Dist. LEXIS 63925, at *4 (D. Minn. March 21, 2011)). “The rationale for this rule is 17 an equitable consideration that if one party expands its case by adding new theories and 18 claims, the other party may do likewise.” Id. 19 Here Mr. Adickman has filed his amended counterclaim in response to Giggling 20 Marlin’s Second Amended Complaint. Additionally, Giggling Marlin’s amendments to the 21 complaint did change the scope and theory of the case.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Gary Wagner, et al., No. CV-19-03216-PHX-SMB
10 Plaintiffs, ORDER
11 v.
12 Derek Adickman, et al.,
13 Defendants. 14 15 Pending before the Court is Plaintiffs/Counterdefendants, Gary Wagner and 16 Giggling Marlin Inc.’s (“Giggling Marlin”) Motion to Dismiss1 the 17 Defendant/Counterplaintiff’s Counterclaim (Doc. 91.) The Counterplaintiff, Derek 18 Adickman, has filed a response with the Court, (Doc. 92), and the Counterdefendants have 19 filed their reply. (Doc. 93.) Pursuant to LRCiv. 7.2(f) the Court elects to rule on the motion 20 without oral argument. 21 I. Background 22 A. Factual Background 23 The grounds for Counterdefendants’ motion are purely procedural and technical in 24 nature. As such, the substantive facts of the case need only be recited with brevity. Giggling 25 Marlin is a Wyoming corporation in the business of importing tequila from Mexico. In the 26 course of its operation, Giggling Marlin entered a business relationship with the 27
28 1 While styled as a motion to dismiss. Giggling Marlin’s request is more properly characterized as a motion to strike, and the Court will treat it as such. 1 Defendant/Counterplaintiff Adickman, the exact nature of that relationship is disputed by 2 the parties. Giggling Marlin alleges that from approximately 2015 until 2018, Mr. 3 Adickman undertook to store and distribute tequila imported from Mexico by Giggling 4 Marlin for distribution in the United States. In 2019, a dispute arose between the parties, 5 and Giggling Marlin alleges it terminated its relationship with Mr. Adickman and requested 6 return of certain inventory and equipment allegedly in Mr. Adickman’s possession. 7 According to Giggling Marlin, Mr. Adickman did not respond to this demand. 8 B. Procedural background 9 On May 17, 2019, Giggling Marlin filed a complaint with this Court against Mr. 10 Adickman, asserting claims for trademark infringement, unfair competition, and breach of 11 contract. (Doc. 1.) Giggling Marlin amended its complaint for the first time on June 18, 12 2019. (Doc. 17.) On July 16, 2019 Mr. Adickman filed a motion to stay the proceedings in 13 order for the parties to pursue arbitration, (Doc. 29), and the Court granted that motion of 14 August 13, 2019. (Doc. 40.) On January 31, 2020, Mr. Adickman filed a motion to continue 15 the stay on proceedings. (Doc. 54.) That same day, Giggling Marlin filed a motion seeking 16 to amend its complaint for a second time and add additional counts. (Doc. 58.) The Court 17 granted both the motion to continue the stay of proceedings, (Doc. 64), and Giggling 18 Marlin’s motion to file the Second Amended Complaint. (Doc. 72.) 19 On May 13, 2020, Mr. Adickman filed a response to the Second Amended 20 Complaint that was titled “Defendant's Answer to Plaintiffs [sic] Second Amended 21 Complaint, Affirmative Defenses, Counter-Claims and Demand for Jury Trial.” (Doc. 74.) 22 On July 20, 2020, Giggling Marlin filed this motion with the Court seeking to dismiss the 23 Defendant’s Counterclaims. (Doc. 91.) As cause, Giggling Marlin asserts that 24 Unbeknownst to it “[Defendant’s] counterclaim filed on May 13, 2020 made major and 25 significant amendments to his original Counterclaim and added a new count.” (Doc. 91 at 26 2.) Giggling Marlin further asserts that the “new Counterclaim is not marked as an 27 Amended Counterclaim” nor was notice given to the Court or Giggling Marlin that the 28 Counterclaim was amended. (Id.) Based on these reasons, Giggling Marlin asserts 1 Defendant’s Counterclaims ought to be dismissed for failure to comply with Rule 15(a)(2). 2 II. Analysis 3 The court declines to strike Mr. Adickman’s amended counterclaim because 4 Giggling Marlin’s Second Amended Complaint changed the theory or scope of its case. 5 The circumstances in which amending a complaint gives the opposing party the right to 6 amend its counterclaims is an unsettled and widely debated issue. Wagner v. Choice Home 7 Lending, 266 F.R.D. 354, 357-59 (D. Ariz. 2009). District courts across the country have 8 developed several distinct approaches2 to the question. Sierra Dev. Co. v. Chartwell 9 Advisory Grp. Ltd., 2016 U.S. Dist. LEXIS 160308, at *10-11 (D. Nev. Nov. 18, 2016). 10 While it appears the Ninth Circuit has declined to rule on the issue, the vast majority of 11 recent opinions by district courts in the Ninth Circuit appear to adopt what has been referred
12 2 Instructive on these different approaches is the opinion of UDAP Indus. v. Bushwacker 13 Backpack & Supply Co., 2017 U.S. Dist. LEXIS 66803, at *8-10 (D. Mont. May 2, 2017), where the Court explained that: 14
15 Although it appears the Ninth Circuit has yet to address the issue, district courts here and throughout the country have historically taken three different 16 approaches [to when amendment of a complaint allows amendment of a 17 counterclaim as of right]. These approaches have been characterized as narrow, moderate, and permissive. Under the narrow approach, 18 counterclaims as of right are permissible “only if they directly relate to the 19 changes in the amended complaint.” Under the permissive approach, “once a plaintiff amends a complaint, the defendant always has a right to amend to 20 bring new counterclaims, without regard to the scope of the amendments.” 21 Falling in between the two, the moderate approach allows counterclaims 22 without leave of court “only when the amended complaint changes the theory 23 or scope of the case, and then, the breadth of the changes in the amended response must reflect the breadth of the changes in the amended complaint.” 24 There is no requirement under this approach “that a defendant specifically tailor its answer to the amended complaint, rather the court considers whether 25 the defendant's answer affects the scope of the litigation in a manner 26 proportional with the amended complaint.” “The rationale for this rule is an equitable consideration that if one party expands its case by adding new 27 theories and claims, the other party may do likewise.” 28 UDAP Indus., 2017 U.S. Dist. LEXIS, at *8-10. (internal citations omitted). 1 to as “the moderate approach.” See e.g., Tate-Robertson v. Walmart Inc., 2019 U.S. Dist. 2 LEXIS 209182, at *5 (C.D. Cal. Aug. 13, 2019) (citing City of W. Sacramento v. R & L 3 Bus. Mgmt., 2019 U.S. Dist. LEXIS 88139, at *4 (E.D. Cal. May 23, 2019)); UDAP Indus. 4 v. Bushwacker Backpack & Supply Co., 2017 U.S. Dist. LEXIS 66803, at *7-10 (D. Mont. 5 May 2, 2017); Sierra Dev. Co., 2016 U.S. Dist. LEXIS 160308 at *11. This Court elects to 6 do the same. 7 Under the moderate approach, a defendant can amend his counterclaim without 8 leave of the Court so long as (1) the amendment comes in response to a plaintiff’s 9 amendment of the underlying complaint, (2) the plaintiff’s amendment “changes the theory 10 or scope” of its complaint, and (3) the changes to the counterclaim “reflect the breadth of 11 the changes in the amended complaint.” UDAP Indus., 2017 U.S. Dist. LEXIS 66803, at 12 *6. The changes in the counterclaim need not arise from or directly relate to the subject 13 matter of the changes in the compliant, “rather the court considers whether the defendant's 14 answer affects the scope of the litigation in a manner proportional with the amended 15 complaint.” Id. (quoting Buffalo Wild Wings, Inc. v. Buffalo Wings & Rings, LLC, 2011 16 U.S. Dist. LEXIS 63925, at *4 (D. Minn. March 21, 2011)). “The rationale for this rule is 17 an equitable consideration that if one party expands its case by adding new theories and 18 claims, the other party may do likewise.” Id. 19 Here Mr. Adickman has filed his amended counterclaim in response to Giggling 20 Marlin’s Second Amended Complaint. Additionally, Giggling Marlin’s amendments to the 21 complaint did change the scope and theory of the case. The Second Amended Complaint 22 contains an entire page of new factual allegations and levied three new causes of action 23 against the Defendant. (Doc. 56.) As such, Mr. Adickman was entitled to amend his 24 counterclaim as long as the amended counterclaim “affects the scope of the litigation in a 25 manner proportional” to Giggling Marlin’s amendments. The Court finds Mr. Adickman’s 26 changes are proportional. The Amended Counterclaim amends a number of factual 27 allegations and adds one additional claim for relief. These changes appear to expand the 28 scope of the case remarkably less than the three additional causes of action and the page of 1 changes added by Giggling Marlin’s amendments to its complaints.3 2 Even were the Court disinclined to follow other courts in this circuit and apply the 3 moderate approach, the Court would decline to strike the counterclaim. “A district court 4 has broad discretion in deciding whether to strike matters from pleadings.” Sierra Dev. 5 Co., 2016 U.S. Dist. LEXIS 160308 at *11 (quoting FDIC v. Willetts, 882 F.Supp.2d 859, 6 870 (E.D.N.C. 2012), reconsideration denied (Oct. 2, 2012) (citing Renaissance Greeting 7 Cards, Inc. v. Dollar TreeStores, Inc., 227 Fed. Appx. 239, 246 (4th Cir. 2007)). As a 8 matter of discretion, striking the counterclaim is not appropriate. 9 Giggling Marlin’s Motion to Dismiss is in reality a motion to strike. The Court finds 10 no undue delay in Mr. Adickman’s amendment coming immediately in response to 11 Giggling Marlin’s own amended complaint. The actions of Mr. Adickman also do not 12 convince the Court that he was acting in bad faith or with dilatory motives. As such, bearing 13 in mind the Rule 15 admonition that leave should be freely given when justice requires, the 14 Court finds that even were we disinclined to apply the moderate approach, as a matter of 15 the Court’s discretion striking Mr. Adickman’s amended counterclaim is unmerited. 16 III. Conclusion 17 Accordingly, 18 IT IS ORDERED denying Plaintiffs’ Motion to Dismiss. (Doc. 91.) 19 20 /// 21 /// 22 /// 23 24 3 Mr. Adickman has also argued that his amendments to the counterclaim are appropriate 25 under Rule 13, and directly relate to Giggling Marlin’s newly asserted theories of relief. 26 Because the Court applies the moderate approach it need not consider this argument. The moderate approach rests on considerations of equity and fairness that if one party is allowed 27 to expand the litigation the other party must be given the same leeway. UDAP Indus., 2017 28 U.S. Dist. LEXIS 66803, at *6. 1 IT IS FURTHER ORDERED that Plaintiffs file an answer to Mr. Adickman’s || Amended Counterclaim, (Doc. 74), within ten (10) days of the date of the entry of this 3 || order. 4 Dated this 20th day of January, 2021. 5 6 ——_— ose 8 onorable Susan M, Brnovich 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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