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CONAN PROPERTIES, INC. v. MATTEL

September 26, 1985

CONAN PROPERTIES, INC., Plaintiff, against MATTEL, INC., Defendant.


The opinion of the court was delivered by: DUFFY

MEMORANDUM & ORDER

KEVIN THOMAS DUFFY, D.J.:

 Plaintiff, Conan Properties, Inc. ("CPI"), brings this action against defendant, Mattel, Inc. ("Mattel"), alleging, inter alia, copyright infringement of its fictitious character CONAN THE BARBARIAN ("CONAN"). Defendant now moves for leave to amend its answer to file a counterclaim. Plaintiff opposes defendant's motion and cross-moves for leave to file a Third Amended Complaint. Plaintiff also requests reconsideration of that portion of Magistrate Dolinger's Memorandum and Order dated June 24, 1985 which disqualified Arthur M. Lieberman, Esq., from pre-trial matters.

 DISCUSSION

 I.Defendant's Motion for Leave to Amend its Answer

 Defendant seeks to amend its answer to file counterclaims for fraudulent inducement and misrepresentation and alleged violations of certain sections of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq. These counterclaims are asserted against CPI as well as six additional counterclaim defendants not previously parties to this litigation: Conan Licensing Company ("CLC"), Conan Merchandising Corporation ("CMC"), Merchandise Development Corporation ("MDC"), Summit Licensing Company ("SLC"), Sigma Merchandising Corporation ("Sigma"), and University Patents, Inc. ("UPI"). CPI objects (1) that SLC, Sigma, and UPI are improper parties, and (2) that Mattel's proposed counterclaim fails to state a cause of action.

 A. SLC, Sigma, and UPI as Counterclaim Defendants

 Rule 19(a) of the Fed. R. Civ. P. provides in relevant part:

 A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.

 Mattel alleges, and CPI does not dispute, that SLC "is a partnership between MDC and Sigma . . .," Counterclaim P8, Exh. A to Mattel's Notice of Motion, and that both SLC and Sigma have their principal place of business in New York. Counterclaim PP8 and 9. Moreover, Mattel claims that it paid SLC $50,000 to terminate Mattel's license agreement with CPI. Counterclaim P37. Mattel now seeks to recover this money directly from SLC. Mattel now seeks to recover this money directly from SLC. Counterclaim Prayer for Relief, PA. Thus, it is apparent that SLC is subject to service of process here in New York, its joinder will not destroy subject matter jurisdiction, and, without SLC, "complete relief cannot be accorded" to Mattel. Accordingly, SLC properly may be joined as a counterclaim defendant.

 However, with regard to Sigma, Mattel only argues that, unless Sigma is joined to the action, MDC "may be subject to the risk of multiple litigation . . . [because] MDC could arguably seek indemnification or contribution from [Sigma] if judgment is entered against it." Mattel's Reply Memorandum of Law In Support Of Motion For Leave To File A Counterclaim, 5. Mere speculation that MDC may seek indemnification from Sigma is not sufficient to justify joinder under Rule 19(a). Rule 19(a) requires either an allegation that (1) without Sigma, "complete relief cannot be accorded," or (2) "[Sigma] claims an interest relating to the subject of the action." Mattel makes neither of these allegations. Accordingly, Mattel is not permitted to include Sigma as a counterclaim defendant.

 Mattel also seeks to join UPI as a counterclaim defendant on the ground that "[MDC] is . . . a wholly owned subsidiary of [UPI] . . . [and] MDC is the alter ego or mere instrumentality of [UPI]." Counterclaim P5. Because CPI concedes MDC may be properly joined as a counterclaim defendant, both CPI and Mattel agree that the sole issue in determining whether UPI also may be joined is whether UPI so controlled and dominated MDC as to justify "piercing the corporate veil." I find that Mattel has pled sufficient facts which, if proven, may justify disregarding the corporate formalities and holding UPI liable for MDC's obligations.

 Among the factors a court should consider in determining whether to "pierce the ...


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