OF LAW IN SUPPORT OF PLAINTIFF'S MOTION FOR LEAVE TO
Plaintiffs Starbucks Corporation and Starbucks U.S. Brands Corporation (named
herein as "Starbucks U.S. Brands, Inc.") ("Starbucks") seek to amend their complaint to reflect
the fact that Starbucks has waived and withdrawn any claim for the recovery of actual damages
from defendant Wolfe's Borough Coffee, Inc. dba Black Bear Micro Roastery ("Black Bear").
(Declaration of John C. Rawls ("Rawls Decl."), Ex. A ([Proposed] First Amended Complaint).)
Justice requires the Court to permit Starbucks to file a First Amended Complaint
because: (1) such an amendment will not in any way expand the legal or factual issues in this
litigation (indeed, it will reduce the scope of disputed issues); (2) Starbucks has not been dilatory
in requesting leave to file a First Amended Complaint; and (3) Black Bear will not be unduly
prejudiced by the amended complaint.
Starbucks does not seek to add new parties, allege new facts, or even add new
claims for relief. Rather, its First Amended Complaint would reduce the expense to the parties
and the time the Court must devote to this action by eliminating claims not vital to the action. As
such, this small modification to the complaint will reduce the expense that the parties are likely
to face in discovery and reduce the resources the Court would otherwise have to devote to this
Nonetheless, Black Bear has refused to stipulate to the filing of the First Amended
Complaint, not because it genuinely fears that resolution of the case will be delayed, that
discovery will be expanded or that new claims will complicate its defense. Rather, Black Bear
opposes the amendment solely because the elimination of Starbucks damage claim threatens to
eliminate Black Bear's insurance coverage, and thus reduce Black Bear's ability to prolong and
complicate this action in hopes of a better settlement. In
essence, Black Bear seeks to advance the absurd proposition that Starbucks should not be allowed to withdraw its damage claim
because such an action would deprive Black Bear of a source of funds that Black Bear wants to
use in a manner that will increase Starbucks' expense.
The quest for such tactical advantage, however, is not a legitimate basis upon
which to deny Starbucks the right to file an Amended Complaint that simply confirms its prior
waiver of its damage claim. Starbucks has made a rational and good faith decision that pursuing
claims for actual damages is not cost effective because the amount and likelihood of any
potential recovery is outweighed by the costs of litigating damage issues. Thus, the Court should
grant Starbucks motion to file its First Amended Complaint, which will narrow the disputed
issues to the propriety of injunctive relief, costs and attorneys fees.
STATEMENT OF FACTS
This is an action for trademark infringement, trademark dilution and unfair competition arising out of defendant's use of the name "Charbucks" as the trademark for a brand of coffee that it sells in competition with plaintiffs' Starbucks® brand coffee products.
As is typical in such cases, Starbucks has prayed primarily for injunctive relief precluding further use of this close variation on the valuable Starbucks® trademark, but also for the actual damages, attorneys fees and costs that are recoverable under the statutes that form the basis for Starbucks
claims for relief.
After filing and serving the Complaint, Starbucks made extensive efforts to resolve this litigation through settlement.
Among other things, the parties participated in a Settlement Conference held before Magistrate Judge Katz in November 2001, and counsel for the parties had a number of follow up communications regarding a negotiated resolution.
(Rawls Decl. ¶ 5.) These discussions continued through approximately December 20, 2001, but ultimately ended in failure.
As a result
of the information exchanged during the settlement discussions,
Starbucks sought to determine whether its damage claim was worth pursuing. Among other things Starbucks was concerned that any damage award might be so small as to be outweighed by the costs of litigating damage issues; for example. Black Bear might both argue that its sales of the infringing Charbucks product were minimal, thus resulting in little if any, recovery of lost
profits, and at the same time seek expensive and time consuming discovery of Starbucks financial records under the theory that such data were relevant to the defense of a damage claim.
Further, Starbucks had (and has) serious doubts as to whether Black Bear has the resources to
satisfy any substantial damage award. Thus, after a brief but thorough analysis of these issues,
Starbucks determined that pursing a damage claim was not worthwhile. (Rawls Decl.
On February 7, 2002, Starbucks counsel wrote to counsel for Black Bear, giving explicit notice that Starbucks was waiving all claims for actual damages. As a housekeeping matter, Starbucks counsel also enclosed a [Proposed] Amended Complaint that was consistent
with this waiver, and asked that Black Bear stipulate to its filing. (Rawls
Decl. ¶ 7.) The First Amended Complaint is virtually identical to the original Complaint except that the claims for
actual damages have been removed. (Rawls Decl., Ex. C (redlined version of the Complaint and
the First Amended Complaint).)
Black Bear's counsel was contacted to remind them that Starbucks was waiting
for defendant's decision, but Black Bear did not respond substantively to the request for a
stipulation for one full month. Finally, on March 6,2002, Black Bear's counsel sent the
following two sentence response:
Please be advised that Defendant will not stipulate to your
Do not hesitate to contact me with any questions or concerns.
Decl. Ex. D.)
Though this letter failed to explain the basis for Black Bear's position, was clearly
part of a desperate effort to force Black Bear's insurer to continue paying defense costs.
Indeed, Black Bear has posted on its Web site a letter from Zurich Insurance Company stating that all
coverage will be withdrawn as soon as the [Proposed] Amended Complaint is filed. (Rawls
Decl. ¶ 9, Ex. E.) It is for this reason alone that the simple, routine amendment sought by
Starbucks is now before this Court.
PLAINTIFFS' MOTION FOR LEAVE TO AMEND SHOULD BE GRANTED
Rule 15 of the Federal Rules of Civil Procedure provides that when a responsive
pleading has been served "a party may amend the party's pleading only by leave of court or by
written consent of the adverse party; and leave shall be freely given when justice so requires."
Fed. R. Civ. P. 15(a). "[AJmendments are favored 'to facilitate a proper decision on the merits.'"
Black Radio Network. Inc. v. NYNEX Corp.. 44 F. Supp. 2d 565, 573 (S.D.N.Y. 1999) (quoting
Conley v.Gibson. 355 U.S. 41,48 (1957)).
Discussing the liberal rules of amendment, the United States Supreme Court has
In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the
motive, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, ... the leave sought should, as the
rules require, be "freely given.
"Foman v. Davis. 371 U.S. 178,182 (1962). The United States Court of Appeals for the Second
Circuit has executed the mandate of Foman reasoning "[A]mendment should normally be
permitted ... refusal to grant leave without justification is
'inconsistent with the spirit of the Federal Rules.'" Rachman Bag Co. v. Liberty
Mut. Ins. Co., 46 F.3d 230, 234 (2d Cir. 1995) (quoting
Foman. 371 U.S. at 182).
The burden is on the party opposing the motion for leave to amend to establish
that the amendment would be legally insufficient, frivolous or prejudicial. Fariello v.
Campbell, 860 F. Supp. 54, 70 (E.D.N.Y. 1994). Defendant cannot meet this burden. As set forth below,
none of the factors preventing the free granting of a motion to amend the pleadings is present
here and granting leave would be consistent with the spirit of the Federal Rules. Thus, Plaintiffs'
motion should be granted.
Plaintiffs' amendment cannot be denied on the grounds of undue delay or
prejudice to the Defendant. Delay alone is an insufficient reason for denying the motion for leave without a showing of undue prejudice to the opposing party.
State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981) (where defendant claimed plaintiff knew of facts underlying new allegations two years before making the motion for leave to amend);
International Bank v. Price Waterhouse & Co., 85 F.R.D. 140,142 (S.D.N.Y. 1980).
Plaintiffs have not engaged in undue delay seeking this amendment. The Complaint, as is customary in trademark cases, sought both injunctive relief and damages. Subsequently, however, Starbucks has learned that Black Bear's revenue on the infringing product were too small to warrant the additional litigation expense necessary to prove damages. Starbucks thus seeks to streamline this action, dropping the claim for actual damages
while preserving their demand for injunctive relief, costs, and attorneys' fees.
Nor can the amendment be opposed solely under the theory that the defendant has
suffered or is threatened with prejudice. In considering the possibility of prejudice, the court
must "weigh the potential for prejudice resulting from granting the amendment against the risk
of prejudice to the moving party if the amendment is denied."
H.L. Havden Co. v. Siemens Med. Svs., Inc. 112 F.R.D. 417, 419 (S.D.N.Y. 1986) (internal quotation marks and citation
omitted). Indeed, "One of the most important considerations in determining whether amendment
would be prejudicial is the degree to which it would delay the final disposition of the action."
H.L. Havden, 112 F.R.D. at 418-19. In H.L. Havden, the court denied the motion for leave to
amend to add the parent company as a defendant where the request came more than a year and a
half after the last date to amend provided under the court's scheduling order, after two years of
"vigorous and contentious discovery," after prior requests to modify scheduling order with no
indication of intent to add defendants' parent company, and where the request was made one
week before defendants' summary judgment motion was to be filed. The court concluded that
substantial additional discovery would be required and the final disposition of the action would
be delayed. Clearly, there is no undue delay here. Starbucks and Black Bear were actively
engaged in settlement discussions through most of December 2001; the Scheduling Order set a
deadline for amendments as of right of December 31,2001. When serious settlement discussions
ended, Starbucks promptly conducted the analysis necessary to determine whether amendment
was appropriate, and promptly contacted Black Bear's counsel to see if the amendment could be
done by stipulation. Black Bear waited a month to respond, and then refused to cooperate.
There would not be any delay in the "final disposition" of this action because Starbucks is not attempting to add new parties or new facts. Moreover, by streamlining the discovery and evidentiary issues in this case, removing the actual damages claims from the complaint will aid in reaching a final disposition of this case more quickly and efficiently.
There is no prejudice here to Defendant. Defendant has not propounded any discovery nor can it, at this point because the fact discovery deadline is April 5,2002.
Moreover, the proposed amendment introduces no new issues, and thus would not prejudice
Defendant even if it had propounded discovery. Furthermore, Black Bear cannot argue prejudice (or bad faith, for that matter) on the basis that their insurance coverage will likely be lost if the Amended Complaint is deemed filed. The quest for such tactical advantage is not a legitimate
basis upon which to deny Starbucks the right to file an Amended Complaint that simply confirms its prior waiver of its damage claim.
Courts have granted leave to amend in more extreme situations than the one
presented here. Courts have held that "[g]enerally, [even] unexcused delay ... will not bar [amendment] if no prejudice will ensue to the other parties."
H.L. Havden. 112 F.R.D. at 419. Leave to amend has been granted not only when requested after the expiration of one year from
the filing of the complaint, but in numerous cases with much longer periods of delay.
See e.g., State Teachers Retirement Bd., 654 F.2d at 855-56 (permitting amendment after three year
interval where no trial date had yet been set, no motion for summary judgment had yet been
filed, and the amendment would "not involve a great deal of additional discovery");
Middle Atlantic Utilities Co. v. S.M.W. Dev. Corp., 392 F.2d 380, 384 (2d Cir. 1968 (granting
amendment despite three year delay reasoning that delay "may be a factor to be considered ...,
unless the motion either was made in bad faith or will prejudice defendant, delay by itself is not
enough to deny the requisite relief); Rachman, 46 F.3d at 235 (leave to amend granted more
than four years after complaint filed where court determined that the party's tardiness may
been attributable to uncertainty as to what issue to focus on). In short, Black Bear cannot
demonstrate that Starbucks has engaged in undue delay seeking leave to amend.
There is no evidence to support an allegation of bad faith or dilatory motive on
the part of the Plaintiffs. As explained more fully above, Starbucks analyzed the advantages and
disadvantages of pursuing damages claims after the settlement negotiations disintegrated and
determined that the damages claims should be waived. Subsequently, Black Bear, refused to
stipulate to the filing of the First Amended Complaint, in a desperate attempt to avoid the loss of
insurance coverage that will likely occur when the Amended Complaint is deemed filed.
Plaintiffs have not previously sought leave to file an amended complaint and,
therefore. Plaintiffs have not failed to cure previous deficiencies by amendments previously
allowed. Thus, the motion may not be properly denied on this basis.
In sum, justice requires the Court to grant Plaintiffs' motion for leave to amend
the complaint because none of the limiting factors enunciated by the Supreme Court are present
reasons set forth, Plaintiffs respectfully request that this
Court grant its
for Leave to File an Amended Complaint.
New York, New York