The opinion of the court was delivered by: Shira A. Scheindlin, United States District Judge.
Mopex, Inc. ("Mopex") owns patents (the "Patents") for certain business
methods relating to a type of investment vehicle called "Exchange Traded
Funds" ("ETFs"). The American Stock Exchange ("Amex") filed this action
on August 10, 2000, seeking a declaration that Mopex's Patents are
invalid and not infringed by Amex's activities with respect to certain of
its own ETFs (the "New York Patent Action"). On September 14, 2000, Mopex
filed an answer and asserted one counterclaim which alleged that Amex was
infringing one of the Patents. On June 22, 2001, Mopex and
Realtimemutualfunds.com ("RTMF") filed an action in Illinois state court
alleging that Amex and others misappropriated Mopex's trade secrets and
incorporated them into certain ETFs (the "Illinois Trade Secret
Action"). See Mopex, Inc. v. American Stock Exchange, LLC, No. 02 Civ.
1656, 2002 WL 34522, at *1 (S.D.N.Y. Mar. 5, 2002) ("Mopex I"). That
action was removed to the Illinois federal court and the claims against
Amex were transferred to this Court. On March 5, 2002, this Court
dismissed all claims against Amex in the Illinois Trade Secret Action.
See id. at *12; Mopex, Inc. v. American Stock Exchange, LLC, No. 02 Civ.
1656, 2002 WL 523417, at *8 (S.D.N.Y. Apr. 5, 2002) ("Mopex II")
(reaffirming decision in Mopex I with respect to defendant Amex).
Mopex now moves for leave to file its first amended counterclaim in
(B) Request that Amex's pending patent applications be
placed in a constructive trust; and
(C) Add RTMF as an additional party to this action.
For the reasons stated below, Mopex's motion is denied in part, and
contingently denied in part.
Rule 15(a) of the Federal Rules of Civil Procedure provides that a
party may amend its pleading "only by leave of court or by written consent
of the adverse party; and leave should be freely given when justice so
requires." Fed.R.Civ.P. 15(a); see also Foman v. Davis, 371 U.S. 178,
182 (1962); Nerney v. Valente & Sons Repair Shop, 66 F.3d 25, 28 (2d
Cir. 1995). The decision whether to grant leave to amend is within the
sound discretion of the court. See Foman, 371 U.S. at 182; Rush v.
Artuz, No. 00 Civ. 3436, 2001 WL 1313465, at *5 (S.D.N.Y. Oct. 26,
2001). However, leave should only be denied for reasons such as undue
delay on the part of the moving party, bad faith, repeated failure to
cure deficiencies in pleading, undue prejudice or futility of the
amendment. See Foman, 371 U.S. at 182; Richardson Greenshields Sec.,
Inc. v. Lau, 825 F.2d 647, 653 n. 6 (2d Cir. 1987).
A. Request to Add the Trade Secret Claims
Amex argues that Mopex should not be permitted to amend its
counterclaim to add the trade secret claims because those claims are
time-barred and the amendment would therefore be futile. See The Amex's
Memorandum of Law in Opposition to Mopex's Motion for Leave to File its
First Amended Counterclaim ("Pl. Opp.") at 8-10. Mopex has admitted that
the trade secret claims were time-barred in New York at the time it
served its original answer. See Mopex I at *6. It asserts, however, that
these claims may be interposed as counterclaims pursuant to N.Y.
C.P.L.R. § 203(d) ("Section 203(d)"). See Memorandum of Law in
Support of Mopex'[s] Motion for Leave to File its First Amended
Counterclaim ("Def. Mem.") at 8.
In Mopex I I explained that, under Section 203(d), counterclaims that
would otherwise be time-barred at the time the complaint is filed may be
asserted as claims for equitable recoupment if they "`arose from the
transactions, occurrences, or series of transactions or occurrences, upon
which a claim asserted in the complaint depends'." Id. at *7 (quoting
Section 203(d)). Accordingly, I concluded that "Mopex could have asserted
its [trade secret] claims against [Amex] as counterclaims in the [New
York] Patent Action, regardless of whether the statute of limitations had
run" when that action commenced. Id. at *8; see also Mopex II at *2. At
this stage of the litigation, however, Section 203(d) is unavailing
because it "does not apply to counterclaims asserted in an amended
answer." Coleman & Zasada Appraisals Inc. v. Coleman, 667 N.Y.S.2d 828,
829 (3d Dep't 1998); see also Joseph Barsuk, Inc. v. Niagra Mohawk Power
Corp., 722 N.Y.S.2d 456, 457 (4th Dep't 2001) (mem.) (Kehoe, J.,
dissenting) (acknowledging that the majority had determined that Section
203(d) does not apply to counterclaims asserted in an amended answer);
75A N.Y. Jur.2d, Limitations and Laches, § 312 (2000) ("[Section
203(d)] does not apply to a counterclaim
asserted for the first time in an amended pleading").*fn1
Mopex could have asserted its trade secret claims pursuant to Section
203(d) on September 14, 2000, at the time of its original answer and
counterclaim, even if those claims were otherwise time-barred. See Mopex
I at *8; Mopex II at *2. When it chose not to do so, it gave up the
claim-saving benefits of Section 203(d). See Coleman & Zasada
Appraisals, 667 N.Y.S.2d at 829; Joseph Barsuk, Inc., 722 N.Y.S.2d at
457; 75A N.Y. Jur.2d, Limitations and Laches, § 312 (2000).
Therefore, Mopex's motion to amend its answer is now governed by N.Y.
C.P.L.R. § 203(f), under which a claim in an amended pleading relates
back to the date of the pleading that is being amended. See Joseph
Barsuk, Inc. v. Niagra Mohawk Power Corp., 722 N.Y.S.2d 192, 875 (4th
Dep't 2001) (mem.). Because Mopex has conceded that its trade secret
claims were time-barred when it served its original answer, these claims
cannot be saved by the `relate back' provision of Section 203(f).