United States District Court, S.D. New York
June 17, 2004.
PERMATEX, INC., Plaintiff,
LOCTITE CORPORATION, Defendant.
The opinion of the court was delivered by: GABRIEL GORENSTEIN, Magistrate Judge
OPINION AND ORDER
Defendant Loctite Corporation ("Loctite") has moved for leave
to amend its answer to assert two new counterclaims, for
misappropriation of trade secrets and for tortious interference
with contractual relations. Plaintiff Permatex, Inc. ("Permatex")
opposes both amendments. For the reasons stated below, Loctite's
motion is granted.
I. GOVERNING LAW
Under Fed.R.Civ.P. 13(f), "[w]hen a pleader fails to set up
a counterclaim through oversight, inadvertence, or excusable
neglect, or when justice requires, the pleader may by leave of
court set up the counterclaim by amendment." This rule must be
"read . . . together with Rule 15(a) . . ., which provides that
leave to amend a pleading `shall be freely given when justice so
requires.'" Gillette Co. v. Philips Oral Healthcare, Inc., 2001
WL 1442637, at *14 (S.D.N.Y. Nov. 15, 2001) (quoting Fed.R. Civ.
P. 15(a)); accord Bergquist v. Aetna U.S. Healthcare,
289 F. Supp.2d 400, 415 (S.D.N.Y. 2003). The logic behind Rule 15(a)'s
liberal standard is that "pleadings are to serve the limited role
of providing the opposing party with notice of the claim or
defense to be litigated, and `mere technicalities' should not
prevent cases from being decided on the merits." Monahan v.
N.Y.C. Dep't of Corr., 214 F.3d 275, 283 (2d Cir.) (citations omitted), cert. denied, 531 U.S. 1035 (2000). Indeed, "it is
rare that such leave should be denied." Ricciuti v. N.Y.C.
Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991) (citation
omitted). Nonetheless, "`[u]ndue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to
the opposing party . . . [or] futility of amendment' will serve
to prevent an amendment prior to trial." Dougherty v. Town of N.
Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 87 (2d Cir. 2002)
(quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). Where, as
here, an amendment to add a counterclaim is at issue, a court
should also consider "whether the counterclaim is compulsory."
Gucci Am., Inc. v. Exclusive Imps. Int'l, 2001 WL 21253, at *6
(S.D.N.Y. Jan. 9, 2001); accord Gabourel v. Bouchard Transp.
Co., 901 F. Supp. 142, 144 (S.D.N.Y. 1995).
A. Permatex's Undue Delay and Prejudice Arguments
Permatex first argues that leave should be denied because of
Loctite's undue delay in bringing this motion and the resulting
prejudice. See Plaintiff's Memorandum of Law in Opposition to
Defendant's Motion for Leave to Amend Its Counterclaim, filed May
24, 2004 (Docket #47) ("Pl. Mem."), at 3-6. Loctite responds that
its motion was timely filed because it learned of the factual
bases underlying its proposed counterclaims only on March 2, 2004
during the deposition of Hans Haas, the current Vice President
of Technology for Permatex and former manager of product
development for Loctite and shortly thereafter filed its motion
for leave to amend. See Loctite Corporation's Memorandum in
Support of Its Motion for Leave to Amend Its Answer to Assert
Additional Counterclaims, dated April 29, 2004 ("Def. Mem.")
(reproduced in Notice of Motion for Leave to Amend Its Answer to
Assert Additional Counterclaims, filed April 29, 2004 (Docket #45)), at 3-5; see
also Declaration of Hans Haas, filed May 24, 2004 (Docket #46)
("Haas Decl."), ¶¶ 1, 5.
Permatex's argument is threefold. First, it asserts that
Loctite knew or should have known in 1999 of the alleged
misappropriation because Loctite neither removed the alleged
trade-secret documents from Haas's files before his move to
Permatex nor objected when the movers packed his files and
shipped them to Permatex. See Pl. Mem. at 4. See generally
Berman v. Parco, 986 F. Supp. 195, 217 (S.D.N.Y. 1997) ("[T]he
Court may deny a motion to amend when the movant knew or should
have known of the facts upon which the amendment is based when
the original pleading was filed, particularly when the movant
offers no excuse for the delay." (internal quotation marks and
citation omitted)). Thus, according to Permatex, "Loctite should
be charged with knowing for more than three years before filing
this motion that Hass [sic] had [the alleged trade-secret
documents] and shipped them to Permatex." Pl. Mem. at 4.
Permatex, however, has offered no evidence that Loctite
actually knew or should have known that these documents were in
Haas's files and were being shipped to Permatex. Instead,
Permatex offers only that Loctite provided the trade-secret
documents to Haas, that Haas placed these documents in his files,
that Loctite removed certain other documents from his files, and
that Haas therefore believed that Loctite had "no objection" to
his taking of the remaining items in his files, including the
trade-secret documents. See Haas Decl. ¶¶ 6, 8-10, 15. But
merely because Loctite may have originally provided the
trade-secret documents to Haas does not mean that Loctite should
have known that he was taking them when he left its employment.
Nor does it show that Loctite should have known that the
documents were being shared with Permatex. Indeed, although
Loctite removed certain other documents from Haas's files, Haas
admits that he "do[es] not know how extensively [Loctite] searched my files"
before leaving. Id. ¶ 11. Without any showing of Loctite's
knowledge that the trade-secret documents were being taken by
Haas or of some fault on Loctite's part in searching Haas's
files, it cannot be said that Loctite knew or should have known
of the factual bases underlying the proposed counterclaims prior
to its taking of Haas's deposition in March 2004.
Second, Permatex contends that Loctite's delay of 58 days after
Haas's deposition to serve its motion "is undue delay in light of
the fact that the discovery period" closed on May 31, 2004. Pl.
Mem. at 4. Before filing its motion, however, Loctite was
required to conduct an investigation into the alleged
misappropriation, to determine whether counterclaims were
warranted, and to draft the motion papers and an amended answer
with the new counterclaims. While the Court believes that 58 days
was longer than absolutely necessary to accomplish these tasks,
it cannot say that the delay was so unreasonable that this factor
should count against Loctite.
Permatex goes on to argue that because the discovery cut-off
has passed, it will be prejudiced unless the period is extended.
See id. at 5. However, Loctite has indicated that any
additional discovery will be "minimal" in light of the fact that
the two Permatex employees discussed in the proposed
counterclaims have already been deposed and that Loctite has
already served a request for documents which "cover[s] the issues
relevant to the amended counterclaims." Loctite Corporation's
Reply Memorandum in Further Support of Its Motion for Leave to
Amend Its Answer to Assert Additional Counterclaims, filed June
3, 2004 (Docket #49) ("Def. Reply Mem."), at 4; accord Def.
Mem. at 4-5. Moreover, Permatex's blanket contention that
"discovery would require an entire new round of document
requests, document production, and depositions," Pl. Mem. at 5, is unsupported by any statement
of what specific discovery Permatex would need and is belied by
its response to an earlier document request in this case, which
was served on Permatex shortly after Haas's deposition. See
Plaintiff's Responses and Objections to Defendant's Third Request
for Production of Documents, dated May 28, 2004 (reproduced as
Ex. 2 to Def. Reply Mem.), at Response No. 1 (stating that
Permatex has already produced all documents responsive to
Loctite's request for documents regarding product control notices
taken by Haas or any other Permatex employee). In any event,
there will be no demonstrable prejudice to Permatex resulting
from the amendments inasmuch as it will be allotted an
appropriate opportunity to take discovery with respect to these
Third, Permatex argues that this motion is barred by the
court's Rule 16 scheduling Order, which prohibits any amendments
to the pleadings after July 31, 2003. Pl. Mem. at 4; see
Consent Scheduling Order, filed May 13, 2003 (Docket #10).
Permatex argues that, although the Court subsequently extended
the discovery cut-off from this scheduling Order, the Court did
not also extend the cut-off for amendments to the pleadings.
See Pl. Mem. at 4. Fed.R.Civ.P. 16(b), however, explicitly
permits an enlargement of a deadline contained in a scheduling
order under a "good cause" standard. While this standard may not
be as liberal as that provided in Fed.R.Civ.P. 15(a), see,
e.g., Parker v. Columbia Pictures Indus., 204 F.3d 326, 340
(2d Cir. 2000); Topps Co. v. Cadbury Stani SAIC, 2002 WL
31014833, at *1 (S.D.N.Y. Sept. 10, 2002), it is appropriate to
grant an enlargement of a deadline where the moving party has
shown "diligence," Parker, 204 F.3d at 340. Because, as
indicated above, Loctite did not learn of the alleged
misappropriation until the deposition of Haas in March 2004 and
brought this motion less than two months later, Loctite has provided the necessary "good cause"
and "diligence" for excusing its failure to move for leave to
amend by the July 31, 2003 cut-off.
B. Permatex's Futility Arguments
Permatex also argues that the proposed counterclaims lack merit
and thus that any amendment would be futile. See Pl. Mem. at
6-9. However, this argument is itself meritless as the
allegations of the proposed counterclaims are sufficient under
Fed.R.Civ.P. 8, which requires only that a party be given fair
notice of a claim. See, e.g., Swierkiewicz v. Sorema N.A.,
534 U.S. 506, 512 (2002).
Concerning Loctite's proposed counterclaim for tortious
interference with contractual relations, Permatex's only
arguments are that Loctite "cannot plead or prove" that
Permatex's conduct was improper or that Permatex had an unlawful
motive. Pl. Mem. at 6-7 (citing Fred Siegel Co. v. Arter &
Hadden, 707 N.E.2d 853, 858 (Ohio 1999), for the proposition
that only improper interference with a contract is actionable,
and Matusoff v. Kuhlman, 2000 WL 192449, at *8 (Ohio Ct. App.
Sept. 28, 1999), for the proposition that a claim of tortious
interference with contractual relations requires an unlawful motive).*fn1
However, at this stage Loctite is not required to "prove"
anything but rather only set forth "a short and plain statement
of the claim showing that [it] is entitled to relief."
Fed.R.Civ.P. 8(a)(2). Loctite has met this requirement through its
allegations that Permatex knew that Loctite's employment
contracts with its former employees prohibited employees from
disclosing trade secrets to third parties, that Permatex induced
a breach of these contracts "[d]espite this knowledge . . . in
order for Permatex to obtain the benefits and exploit the
knowledge of such information," and that there was "no
justification for Permatex procuring the breach of any contract
between Loctite and its former employees." First Amended Answer
and Counterclaim to First Amended Complaint, undated ("Proposed
Answer") (reproduced as Ex. A to Def. Mem.), ¶¶ 122-24.
Permatex's assertion that Haas and not Permatex "provided the
impetus for his use" of the trade secrets, Pl. Mem. at 7, relies
on materials outside of the pleadings and thus cannot be
considered on a motion for leave to amend. See, e.g., Nettis
v. Levitt, 241 F.3d 186, 194 n. 4 (2d Cir. 2001) (per curiam)
("Determinations of futility [of amendment] are made under the
same standards that govern Rule 12(b)(6) motions to dismiss."); see also Cosmas v. Hassett, 886 F.2d 8, 13 (2d
Cir. 1989) ("On a motion to dismiss, the district court must
limit itself to a consideration of the facts alleged on the face
of the complaint and to any documents attached as exhibits or
incorporated by reference." (citations omitted)).
As for Loctite's proposed counterclaim for misappropriation,
Permatex's only argument is that "neither Permatex nor Haas
obtained the [trade secrets] by improper means." Pl. Mem. at 8
(citing Ohio Rev. Code Ann. § 1333.61 for the proposition that no
claim of misappropriation may lie unless the alleged trade
secrets were appropriated improperly). Again, however, Permatex's
argument relies on information outside of the pleadings and
therefore may not be considered by this Court in the context of
the current motion. Because the proposed answer alleges that
Permatex used improper means in appropriating the alleged trade
secrets, see, e.g., Proposed Answer ¶¶ 113, 115-16, the
requirements of Fed.R.Civ.P. 8(a)(2) have been met.
C. Permatex's Rule 13(a) Argument
Finally, Permatex argues that Loctite has conceded that "the
proposed counterclaims are not compulsory within the meaning of
Fed.R.Civ.P. 13(a)." Pl. Mem. at 3. This alleged concession
was Loctite's statement in its memorandum of law that "the
alternative to allowing leave to amend would be a grossly
inefficient separate lawsuit by Loctite." Def. Mem. at 5.
Permatex thus argues that leave should be denied because "a
compulsory counterclaim cannot by definition be brought
separately" and "[t]hus, this factor weighs in favor of denying
Loctite's motion." Pl. Mem. at 3.
Whether a counterclaim is compulsory, however, is merely one
factor for a court to consider in deciding a motion for leave to
amend. See, e.g., Gucci Am., 2001 WL 21253, at *6; Gabourel, 901 F. Supp. at 144. Even assuming arguendo that
the counterclaims are not compulsory, this factor would not alter
the Court's conclusion that leave to amend should be granted
based on the lack of undue delay, prejudice, or futility.
Moreover, if Permatex is correct that the counterclaims are not
compulsory, denying leave to amend and thereby requiring Loctite
to file a separate lawsuit one that would allege only
misappropriation and tortious interference would merely cause a
pointless duplication of Court and party resources. Conclusion
Loctite's motion for leave to amend (Docket #45) is granted.
Exhibit A thereto is deemed filed as an amended pleading.
Permatex shall respond to the amended answer and counterclaims on
or before July 13, 2004.