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January 19, 1999


The opinion of the court was delivered by: Leisure, District Judge.


This action involves allegations that defendants have infringed plaintiff's patent regarding a hydraulic, towable backhoe. Before the Court are defendants' objections to a Report and Recommendation (the "Report") issued by the Honorable Ronald L. Ellis, United States Magistrate Judge, recommending denial of a motion by defendant R H & M Machine Co. ("R H & M") for leave to interpose an additional defense and counterclaim concerning the patent.

For the reasons stated in this Opinion and Order, the Report is rejected and defendant R H & M's motion for leave to amend is GRANTED.


On June 27, 1996, HCC filed the instant action, alleging that two other products manufactured by R H & M, the GO FOR DIGGER IV and GO FOR DIGGER V, also infringe the '358 patent. HCC subsequently amended its complaint, and R H & M answered and interposed counterclaims seeking declaratory judgment that the products do not infringe the '358 patent and that the patent is invalid. This Court referred the case to Judge Ellis on May 20, 1997, for general pre-trial management.

On June 11, 1997, HCC filed a Second Amended Complaint adding Herbert David Edgell, Jr., the President and a director and partial owner of R H & M, as a defendant and alleging additional claims for unfair competition and tortious interference with prospective business advantage. The Second Amended Complaint is substantially identical to the First Amended Complaint with respect to plaintiff's claim for patent infringement. Defendants jointly filed an answer to the Second Amended Complaint, which, in addition to the defenses and counterclaims previously raised, interposed a counterclaim of unenforceability and a defense of unclean hands, based on alleged inequitable conduct by the patent applicant before the Patent & Trademark Office ("PTO").

On August 6, 1997, in an Order with a caption listing R H & M as the sole defendant, Judge Ellis struck the counterclaim and defense raised by R H & M, and established a schedule for R H & M to seek leave to amend its answer to include the proposed counterclaim and defense.*fn1 In response to the Order, R H & M filed an amended answer omitting the contested counterclaim and defense and, in addition, moved for leave to add those claims.*fn2 Defendant Edgell separately filed an amended answer which included both the defense and the counterclaim.

Although the only motion before Judge Ellis was that of defendant R H & M for leave to amend, the Report also appears to recommend that defendant Edgell be denied the ability to assert the identical counterclaim and defense in his first responsive pleading. Judge Ellis found that because Edgell is "in privy to R H & M", Edgell is also "bound under the same preclusion principles" as those mentioned above and recommended that, therefore, his assertion of those claims should be disallowed. See id. at 4 n. 2.*fn3


I. Standard of Review

Before assessing the merits of defendants' objections to the Report, the Court addresses a threshold issue regarding the appropriate standard of review. Pursuant to Rule 72 of the Federal Rules of Civil Procedure and its enabling statute, 28 U.S.C. § 636(b)(1), determination of the review standard turns on whether the recommendation by the Magistrate is dispositive of a claim or defense of a party. See Fed.R.Civ.P. 72. Defendant R H & M contends the Report concerns a dispositive matter and, thus, that this Court must review the Report de novo. See Fed. R.Civ.P. 72(b). Plaintiff, by contrast, argues the Report addresses nondispositive issues and is subject to deferential review only for "clear error". See Fed.R.Civ.P. 72(a).

The proper characterization of a denial of leave to amend a pleading is not settled in this Circuit. See C.V. Rao v. Envirodyne Enq'rs of New York, No. 94 Civ. 3368, 1996 WL 594054, at *2 (E.D.N.Y. Oct. 11, 1996). Several courts have held, with little explanation, that such a denial is nondispositive. See Coffey v. Dobbs Int'l Serv., Inc., 5 F. Supp.2d 79, 83 (N.D.N Y 1998); Smith v. Dakar Constr. Corp., No. 94 Civ. 7645, 1997 WL 711053, at *2 (S.D.N.Y. Nov. 13, 1997); Moss v. Stinnes Corp., No. 92 Civ. 3788, 1995 WL 338315, at *1 (S.D.N.Y. June 7, 1995); Aries Ventures Ltd. v. Axa Fin. S.A., 696 F. Supp. 965, 965 (S.D.N.Y. 1988). Other courts have found such a denial to be dispositive, since the denial forecloses the party from asserting the claim or claims in the litigation. See Champion Titanium Horseshoe, Inc. v. Wyman-Gordon Inv. Castings, Inc., 925 F. Supp. 188, 190 (S.D.N.Y. 1996); Mitchell v. ...

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