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Sweet Street Deserts, Inc. v. Chudleigh's Ltd.

United States District Court, Third Circuit

September 27, 2013

SWEET STREET DESERTS, INC., Plaintiff,
v.
CHUDLEIGH’S LTD., Defendant.

MEMORANDUM RE: DEFENDANT’S MOTION FOR LEAVE TO FILE ITS AMENDED ANSWER WITH COUNTERCLAIMS

Michael M. Baylson, U.S.D.J.

I. Introduction

Defendant moves to amend its answer to add two new affirmative defenses and to add three new counter-claims. Plaintiff objects.

II. Factual Background

Both the Plaintiff, Sweet Street Deserts, and the Defendant, Chudleigh’s, are baking companies that produce bakery products for retail and restaurants. In July 2010, Plaintiff created an apple turnover product for Applebee’s restaurants, and sought to outsource the apple turnover production to other manufacturers. In September 2010, Plaintiff contacted Defendant about manufacturing its apple turnover product, and the parties signed a Mutual Nondisclosure Agreement on September 28, 2010. Defendant provided Plaintiff with samples of the apple turnover product, but Plaintiff decided to produce the turnovers in-house and terminated the business relationship. To establish its baking facility, Plaintiff received quotes from machine manufacturers for equipment specifically designed to produce its apple turnover product in early 2011. Shortly after receiving a quote from Forms and Frys for a dough folding machine, Forms and Frys refused to manufacture the machine for Plaintiff. Plaintiff alleges this was because Defendant pressured Forms and Frys not to do business with Plaintiff.

On August 15, 2011 Applebee’s began selling Plaintiff’s apple turnover product. On August 24, 2011 Defendant sent Applebee’s a cease and desist letter, asserting the cinnamon apple turnover pastry it sold was “strikingly similar” to Defendant’s BLOSSOM design product protected under United States trademark registration. Applebee’s terminated its contact with Plaintiff, allegedly because of Defendant’s cease and desist letter.

Plaintiff filed a complaint for a declaratory judgment of noninfringement of Defendant’s trademark, that the mark is invalid, and for cancellation of the trademark. Plaintiff also claims tortious interference with its contacts with Forms and Frys and Applebee’s, unfair or deceptive acts, and breach of the mutual nondisclosure agreement. After this court denied Defendant’s motion to dismiss on April 4, 2013 (Sweet St. Deserts, Inc. v. Chudleigh’s Ltd., No. 12-3363, 2013 WL 1389760 (E.D. Pa. Apr. 4, 2013)), Defendant filed its Answer and Affirmative defenses, but no counterclaims, on April 19. On July 2, 2013 Defendant moved to amend its answer to add two new affirmative defenses and to add three new counter-claims.

Defendant seeks to add the affirmative defense that Plaintiff’s complaint fails to state a claim because the complaint does not include any facts to support the alleged pressure Defendant exerted on Forms and Frys, and because the complaint does not include any allegations of materiality or of intent to support Plaintiff’s claim of cancellation on the ground of fraud ab initio. The proposed Amended Answer adds counterclaims for trademark infringement, false designation of origin, and unfair competition, which arise out of the same dispute over Plaintiff’s apple turnover product.

III. legal standards

Under Federal Rule of Civil Procedure 15(a)(2) a party may amend a filing to which an response is required with leave of the court. Fed.R.Civ.P. 15(a)(2) (“The court should freely give leave when justice so requires.”). Leave to amend should be granted absent “undue delay, bad faith, dilatory motive, prejudice, and futility.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). An opposing party “must show that it was unfairly disadvantaged or deprived of the opportunity to present facts or evidence which it would have offered had the . . . amendments been timely.” Heyl & Patterson Int'l, Inc. v. F. D. Rich Hous. of Virgin Islands, Inc., 663 F.2d 419, 426 (3d Cir. 1981).

FRCP 13(a) requires a pleading to “state as a counter claim any claim that . . . the pleader has against an opposing party if that claim: (A) arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” Fed.R.Civ.P. 13(a). “When claims are compulsory under [Rule] 13(a), the argument for allowing amendment is ‘especially compelling.’” Perfect Plastics Indus., Inc. v. Cars & Concepts, Inc., 758 F.Supp. 1080, 1082 (W.D. Pa. 1991) (citing Spartan Grain & Mill Co. v. Ayers, 517 F.2d 214, 220 (5th Cir.1975)).

IV. The Parties’ Arguments

Plaintiff contends leave to amend is inappropriate because Defendant’s counter-claims result in undue delay that would prejudice Plaintiff. Plaintiff further contends Defendant’s counter-claims would be futile because they are duplicative and barred by latches.

1. Plaintiff contends Defendant “has unduly delayed these proceedings with dilatory and unnecessary motion practice” because Defendant failed to ask Plaintiff for consent to amend under FRCP 15(a)(2). Defendant contends two and a half months is not an undue delay. Defendant further argues that requesting Plaintiff’s consent would ...


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