Grupke v. Linda Lori Sportswear, Inc.

• Decision Date: 08 April 1996
• Docket Number: No. 94 CV 0782.,94 CV 0782.
• Citation: 921 F. Supp. 987
• Parties: Anna GRUPKE and Jerry Roberts, d/b/a Hep Cat, Plaintiffs, v. LINDA LORI SPORTSWEAR, INC., Agents Card and Gift Co., Inc., Craig Weiss, and Janet Bruschetti, Defendants.
• Court: U.S. District Court — Eastern District of New York

921 F. Supp. 987

Anna GRUPKE and Jerry Roberts, d/b/a Hep Cat, Plaintiffs, v. LINDA LORI SPORTSWEAR, INC., Agents Card and Gift Co., Inc., Craig Weiss, and Janet Bruschetti, Defendants.

No. 94 CV 0782.

United States District Court, E.D. New York.

April 8, 1996.

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Nilles & Nilles, S.C., Milwaukee, WI (Andrew J. Nilles and John P. Frederickson, of counsel), for plaintiff.

Coleman & Seife, White Plains, NY (Alan Seife, of counsel), for defendants.

MEMORANDUM AND ORDER

NICKERSON, District Judge.

Plaintiffs Anna Grupke and Jerry Roberts, Tennessee residents doing business as, and joint owners of, Hep Cat, a mail order business that designs and sells apparel decorated with designs of cats, claim in this action against defendants Linda Lori Sportswear, Inc. ("Linda Lori"), Agents Card & Gift Co., Inc. ("Agents"), Craig Weiss, and Janet Bruschetti, violations of the Copyright Act, 17 U.S.C. § 101, et seq, and § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and the common law of unfair competition.

The complaint alleges in Count I that defendants willfully infringed plaintiffs' registered copyright, in Count II that defendants willfully violated the Lanham Act by using a reproduction of plaintiffs' copyrighted drawing and infringing their unregistered trademark and their trade dress, and in Count III that defendants engaged in common law unfair competition. The complaint seeks damages and injunctive relief. The court has jurisdiction under the federal statutes and by reason of diversity. See 28 U.S.C. §§ 1331, 1332, and 1338(b).

All four defendants move to amend their answer to assert counterclaims of common law unfair competition and tortious interference with business relations. Defendants Linda Lori, Agents, and Weiss move for summary judgment on Counts II and III of the complaint. Defendant Bruschetti moves for summary judgment on all three counts.

I

Plaintiffs originally brought the action on February 18, 1993 against Linda Lori and the Miles Kimball Company ("Miles Kimball") in the United States District Court for the Eastern District of Wisconsin. On January 6, 1994 Judge Rudolph T. Randa denied a motion by Linda Lori to dismiss. Because Linda Lori had not answered by January 28, 1994, plaintiffs then moved for entry of a default judgment. By Decision and Order dated February 14, 1994 Judge Randa severed the claims against Linda Lori and transferred them to this district under 28 U.S.C. § 1404(a), and stayed the claims against Miles Kimball.

Plaintiffs pursued in this court the motion for entry of a default judgment. The court denied the motion on June 10, 1994. On September 15, 1994, plaintiffs filed, without opposition, an amended complaint adding Agents, Weiss, and Bruschetti as defendants.

On October 6, 1994, Magistrate Judge Mann, to whom the case had been assigned for discovery, set a discovery schedule with a final deadline of May 31, 1995. She later extended this deadline to July 31, 1995.

Defendants filed their motions to amend and for summary judgment on August 28, 1995 and October 6, 1995, respectively. On October 6, 1995, defendants also moved for sanctions against plaintiffs and their counsel pursuant to Rule 11 of the Federal Rules of Civil Procedure. By letter dated October 16, 1995, defendants withdrew their motion for sanctions.

II

The following facts appear substantially undisputed. Linda Lori is a Pennsylvania corporation manufacturing and selling apparel printed with various designs. Agents is a New York corporation engaged in the retail sale of gifts and greeting cards. Weiss is the president of Linda Lori and of Agents. Bruschetti has been a salaried employee of Linda Lori and/or Agents since 1983, but has never participated in a pension, profit sharing, or retirement plan of either corporation.

Plaintiffs Grupke and Roberts, wife and husband, jointly own and operate Hep Cat, a mail order business located in Nashville, Tennessee. Hep Cat designs and sells clothing, including tee-shirts decorated with designs and drawings of cats. In 1986 Grupke created a pen and ink drawing for such a tee-shirt design. The front of the shirt depicts six cats appearing to walk towards the viewer, and the back shows a rear view of the same six cats walking away from the viewer. Since 1986 plaintiffs have marketed this shirt under the name "Cats Coming and Going." Grupke received from the United States Register of Copyrights a Certificate of Copyright Registration dated February 9, 1987 for the pen and ink drawing.

In March 1992 defendant Weiss received from H & S Sportswear, Inc. ("H & S") a sample tee-shirt depicting the fronts and backs of cats. Weiss says that H & S told him that a company called Any Prints, Inc. ("Any Prints") held the copyright in the tee-shirt design. Weiss ordered some tee-shirts bearing this design for eventual sale by Agents. On or about April 15, 1992, Weiss asked Any Prints to print an additional quantity of the same shirts. Between March and May of 1992 Linda Lori sold some of these tee-shirts and sent samples to some of its customers, including Miles Kimball and Carol Wright Sales ("Carol Wright").

In May 1992 Weiss learned that the design on the Any Prints shirts was very similar to plaintiff's copyrighted design on shirts marketed as "Cats Coming and Going." On advice of counsel, Linda Lori hired an artist to create a different design showing the front and back of cats. This new design, called "Heads and Tails," consisted of frontal and rear views of five cats. After obtaining a registered copyright Linda Lori began selling tee-shirts bearing the new design, its copyright, and the trademark "Heads and Tails."

Miles Kimball's fall 1992 catalogue, produced before Kimball was aware of the copyright problem, contained pictures of tee-shirts bearing the "Any Prints" design. After learning of this, Miles Kimball continued using its fall 1992 catalogue but sold only the "Heads and Tails" tee-shirts. Miles Kimball sold 1,960 cat shirts, at least 1,648 of which bore the "Heads and Tails" design.

Miles Kimball sent customers who received a "Heads and Tails" shirt a letter explaining that the shirt was different than the one featured in the catalogue and offering a refund if the customer was not satisfied with the shirt.

Carol Wright mistakenly published a picture of the "Any Prints" shirt in its catalogue. When Linda Lori learned of this mistake, Weiss telephoned Carol Wright to inform it that a picture of the "Head and Tails" shirt should appear. By letter dated May 19, 1993, Bruschetti confirmed that Linda Lori's design was "Heads and Tails."

Linda Lori has continued to market its Heads and Tails shirt.

III

Defendants' proposed counterclaims allege, in substance, the following. In September 1992 plaintiffs began to contact Linda Lori's customers. They made false and malicious statements to these customers saying that Hep Cat had a copyright on all front and back cat shirts, that Linda Lori had stolen Hep Cat's idea, that Linda Lori's shirts were inferior, and that Hep Cat and Linda Lori were already litigating the matter. Hep Cat offered to supply Linda Lori's customers with its Cats Coming and Going shirts and threatened to sue them if they continued to sell the Heads and Tails shirts.

Plaintiffs' false and malicious statements to Linda Lori's customers were allegedly intended wrongfully to appropriate the benefits of Linda Lori's established business relations. As a result, some of those customers, including Miles Kimball and Hanover House, ceased or substantially reduced their business with Linda Lori.

A

On these facts defendants allege separate counterclaims for unfair competition and tortious interference with business relations. But all of the conduct of which defendants complain falls within the rubric of tortious interference. Accordingly, the court will treat their motion as an attempt to assert a single counterclaim.

Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to amend a pleading "shall be freely granted when justice requires." A party may amend its pleading to assert a "colorable" new claim, see S.S. Silberblatt, Inc. v. East Harlem Pilot Block, 608 F.2d 28, 42 (2d Cir.1979), unless the nonmovant shows prejudice or bad faith. See Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir.1993). A court may also deny a motion to amend on account of "undue delay." See State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir.1981).

The assertion of a new claim causes "prejudice" if it would "(i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction." Id. But "mere delay," without bad faith or undue prejudice, is not enough. Id.

Plaintiffs make several objections to the motion to amend. They say that the new claims are meritless, their assertion at this time would create substantial prejudice, defendants have long been aware of the facts underlying the claims, and venue for the counterclaims does not lie in this district.

B

A proposed counterclaim is "colorable" if it would survive a motion to dismiss. See S.S. Silberblatt, supra, 608 F.2d at 42; CBS, Inc. v. Ahern, 108 F.R.D. 14, 18 (S.D.N.Y.1985). A denial of leave to amend is justified "only if it appears to a certainty that plaintiff cannot state a claim." See Square D Co. v. Niagara Frontier Tariff Bur., Inc., 760 F.2d 1347, 1366 (2d Cir.1985) (citation and internal quotation marks omitted), aff'd, 476 U.S. 409, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986).

To determine whether the proposed counterclaims state claims of tortious interference with business relations, the court should first determine what law is applicable.

In a diversity action, the court applies the choice-of-law principles of the state in...