Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

UDAP Industries, Inc. v. Bushwacker Backpack & Supply Co.

United States District Court, D. Montana, Butte Division

May 2, 2017

UDAP INDUSTRIES, INC., Plaintiff,
v.
BUSHWACKER BACKPACK & SUPPLY CO., d/b/a Counter Assault, Defendant.

          ORDER

          Jeremiah C. Lynch United States Magistrate Judge.

         Plaintiff UDAP Industries, Inc. (“UDAP”) has filed a motion to strike the counterclaim asserted by Defendant Bushwacker Backpack & Supply Co., d/b/a Counter Assault (“Counter Assault”) in its answer to the amended complaint, and for sanctions. Counter Assault has in turn moved to amend the pretrial scheduling order and for leave to assert its counterclaim.

         I. Background

         UDAP and Counter Assault are Montana corporations engaged in the manufacture, distribution, and sale of bear deterrent pepper spray. UDAP filed its Complaint in this case on May 20, 2016, alleging generally that Counter Assault published false and misleading advertisements in violation of federal statutory and Montana common law. The Complaint alleged a federal claim under the Lanham Act, 15 U.S.C. § 1125, and Montana common law claims for intentional interference with business relations or prospective economic advantage, false light, and libel. On August 1, 2016, Counter Assault filed an Answer that did not include any counterclaims.

         On August 23, 2016, the Court issued a pretrial scheduling order pursuant to Federal Rule of Civil Procedure 16. The scheduling order established September 20, 2016, as the deadline for amending the pleadings, and March 10, 2017, as the discovery deadline. (Doc 16, at 1).

         On January 30, 2017, the parties filed a joint motion to amend the scheduling order pursuant to Federal Rule of Civil Procedure 16. The Court granted the motion, and entered the amended scheduling order proposed by the parties. The amended scheduling order gave UDAP until February 10, 2017, to file an Amended Complaint and extended the discovery deadline to June 2, 2017. (Doc. 25, at 1). UDAP filed its Amended Complaint in compliance with the extended deadline, again asserting claims under the Lanham Act and for intentional interference with business relations or prospective economic advantage, false light, and libel. Although UDAP did not specifically plead any new legal claims, it added several new paragraphs to the general allegations section. (Doc. 26).

         On March 8, 2017, Counter Assault filed an Answer to the Amended Complaint and asserted a Counterclaim against UDAP. Counter Assault's counterclaim contains three counts: (1) a Lanham Act claim, (2) a claim for intentional interference with business relations or prospective economic advantage; and (3) a libel claim. (Doc. 29, at 15-23). On March 13, 2017, Counter Assault amended its Counterclaim to include a number of additional factual allegations. (Doc. 29). Counter Assault did not seek leave of Court before filing either the original or amended Counterclaim.[1]

         UDAP has moved under Rule 12(f) to dismiss or strike the Counterclaim on the ground that Counter Assault was required to obtain leave of Court, and seeks sanctions under Rule 16(f). Counter Assault takes the position that it was free to assert its Counterclaim as a matter of right in response to the Amended Complaint, and argues sanctions are not warranted. Alternatively, Counter Assault moves to amend the Rule 16 scheduling order and for leave to file its Counterclaim pursuant to Rule 15.

         II. Discussion

         A. Amendment as a Matter of Right

         UDAP argues Counter Assault was not entitled to assert a counterclaim for the first time in response to the Amended Complaint without first seeking leave of Court.

         The Federal Rules of Civil Procedure do not directly address the question of whether a defendant is entitled as a matter of right to assert new counterclaims in answer to an amended complaint, or whether a defendant must first seek leave of court. Rule 13 makes clear that a counterclaim, whether compulsory or permissive, must be raised in “a pleading” by a “pleader.” Fed.R.Civ.P. 13(a)&(b). But because a counterclaim is not one of the pleadings recognized under Rule 7(a), a party seeking to assert a counterclaim must do so in its answer. See Fed.R.Civ.P. 7(a) & 13(a). Prior to the 2009 amendments to the Federal Rules of Civil Procedure, amendments to add omitted counterclaims were governed by Rule 13(f), which provided that “[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.” Fed.R.Civ.P. 13(f) (2007). In the 2009 amendments, Rule 13(f) was “deleted as largely redundant and potentially misleading.” 2009 Advisory Committee Notes to Fed.R.Civ.P. 13. The Advisory Committee Notes to Rule 13 now state that “[a]n amendment to add a counterclaim will be governed by Rule 15.” UDAP maintains that under Rule 15, Counter Assault was required to obtain leave of court before filing its Counterclaim. Rule 15(a)(1) allows a party to amend a pleading once as a matter course within 21 days after serving it, or if the pleading is one that requires a response, within 21 days after service of a responsive pleading or a Rule 12(b), (e), or (f) motion. Rule 15(a)(2) states that “[i]n all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave.” UDAP argues that because Counter Assault did not timely amend its answer to the original complaint to assert its Counterclaim as a matter of course under Rule 15(a)(1), it was required to seek leave of court under Rule 15(a)(2) before asserting its Counterclaim.

         UDAP contends a number of district courts in the Ninth Circuit have reached the same conclusion under similar circumstances. It cites Horton v. Calvary Portfolio Services, LLC, 301 F.R.D. 54, 549 (S.D. Cal. 2014) for the proposition that “[l]eave to add a counterclaim omitted from the original answer is governed by Rule 15(a)(2).” Horton v. Calvary Portfolio Services, LLC, 301 F.R.D. 54, 549 (S.D. Cal. 2014). See also Easter Seals, Inc. v. Life, Inc., 2010 WL 892189 *2-3 (D. Ariz. March 10, 2010) (applying Rule 15(a) to the defendant's motion for leave to file an omitted counterclaim). But the defendants in those cases were not seeking leave to add counterclaims in response to an amended pleading by the plaintiffs. Horton and Easter Seals are thus distinguishable, and do not address the issue presented here, which is whether a defendant may assert a counterclaim as a matter of right when filing an answer to an amended complaint.

         Although it appears the Ninth Circuit has yet to address the issue, district courts here and throughout the country have historically taken three different approaches. These approaches have been characterized as narrow, moderate, and permissive. See Sierra Development Co. v Chartwell Advisory Group, Ltd., 2016 WL 6828200 *2 (D. Nev. Nov. 18, 2016). Under the narrow approach, counterclaims as of right are permissible “only if they directly relate to the changes in the amended complaint.” Port-A-Pour, Inc. v. Peak Innovations, Inc., 2016 WL 1258552 *2 (D. Colo. March 31, 2016). Under the permissive approach, “once a plaintiff amends a complaint, the defendant always has a right to amend to bring new counterclaims, without regard to the scope of the amendments.” Elite Entm't, Inc. v. Khela Bros. Entm't, 227 F.R.D. 444, 446 (E.D. Va. 2005).

         Falling in between the two, the moderate approach allows counterclaims without leave of court “only when the amended complaint changes the theory or scope of the case, and then, the breadth of the changes in the amended response must reflect the breadth of the changes in the amended complaint.” Bern Unlimited, Inc. v. Burton Corp., 25 F.Supp.3d 170 (D. Mass. 2014). There is no requirement under this approach “that a defendant specifically tailor its answer to the amended complaint, rather the court considers whether the defendant's answer affects the scope of the litigation in a manner proportional with the amended complaint.” Buffalo Wild Wings, Inc. v. Buffalo Wings & Rings, LLC, 2011 WL 2261298 *4 (D. Minn. March 21, 2011). “The rationale ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.